Binance CEO Changpeng Zhao Will Plead Guilty to Money Laundering Charges, Company Braces for $4.3 Billion Penalty

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Published: November 21, 2023 at 2:16 pm Updated: November 21, 2023 at 2:24 pm

In Brief

Binance CEO Changpeng ‘CZ’ Zhao is set to plead guilty for money laundering and pay $4.3 billion to resolve criminal charges.

Binance CEO Changpeng Zhao to Plead Guilty to Money Laundering, Company Braces for $4.3 Billion Penalty

Binance CEO Changpeng ‘CZ’ Zhao is reportedly set to enter a guilty plea for money laundering as part of a negotiated settlement with the Department of Justice (DOJ). Under the terms of the deal, crypto exchange Binance will pay a substantial $4.3 billion to resolve the criminal investigation.

As per a insider report by Wall Street Journal, Zhao currently intends to step down from his role as CEO of Binance, although he plans to retain majority ownership of the company.

While being scheduled to appear in a Seattle court on Tuesday afternoon at 3pm ET, Zhao’s plea marks a pivotal moment for the crypto exchange. As he seeks to conclude prolonged investigations by U.S. regulators, a positive decision is expect to lead with potential disruptions to financial markets and crypto holders.

Binance has been under federal prosecutors scrutiny since 2018, with the company being blamed for money laundering scheme communications that involved Zhao. The recent investigation by DOJ’s follows a litany of legal challenges faced by the crypto exchange, particularly in United States.

Binance’s Previous Legal Struggles

In June, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance and Zhao, alleging an elaborate scheme to evade U.S. federal securities laws. The SEC had accused the crypto exchange with 13 charges including artificially inflating trading volumes, misappropriating customer funds, failing to restrict U.S. customers and providing misleading information about market surveillance controls.

The SEC’s legal action triggered a substantial outflow of funds from Binance, with approximately $780 million withdrawn within 24 hours of the lawsuit. Contrary to the SEC’s claims, Binance vehemently denied all allegations, vowing to vigorously defend its platform.

In a development reminiscent of prior market fluctuations during the turmoil, the Wall Street Journal reported that the price of Binance Coin (BNB) has once again surged, reaching a five-month high at $271.90.

Now that CZ and Binance have been removed from the field, the SEC can approve the spot ETF and Blackrock, Fidelity, Invesco and other large players can take over. This is how the game is played.

— Mike Alfred (@mikealfred) November 21, 2023

Binance’s Troubles Resemble Patterns Similar to FTX and Kraken

The recent developments unfold in the aftermath of FTX’s collapse eight months ago, and both exchanges now face allegations of mishandling customer funds.

FTX’s demise, characterized by the co-mingling of funds and high-risk investments without customer awareness, mirrored the subsequent turmoil at Binance. The announcement triggered a rush among FTX customers to withdraw their assets, resulting in a liquidity crisis for the latter.

Subsequently, FTX CEO Bankman-Fried faced conviction on charges of substantial fraud against customers.

Coincidentally, the Department of Justice’s action against Binance aligns also with the SEC’s charges against Kraken, the third-largest crypto exchange by trading volume.

Kraken was accused of allegedly operating as an unregistered securities exchange, broker, dealer and clearing agency. Notably, the exchange had previously reached a settlement with the SEC in February. The agreement mandated the cessation of crypto staking services for U.S. clients, accompanied by a payment of $30 million in disgorgement, prejudgment interest and civil penalties.

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About The Author

Victor is a Managing Tech Editor/Writer at Metaverse Post and covers artificial intelligence, crypto, data science, metaverse and cybersecurity within the enterprise realm. He boasts half a decade of media and AI experience working at well-known media outlets such as VentureBeat, DatatechVibe and Analytics India Magazine. Being a Media Mentor at prestigious universities including the Oxford and USC and with a Master’s degree in data science and analytics, Victor is deeply committed to staying abreast of emerging trends.
He offers readers the latest and most insightful narratives from the Tech and Web3 landscape.

Victor Dey