- Zhao is expected to enter a plea in Seattle on Tuesday and step down as CEO
- Binance will also plead guilty to a criminal charge and agree to the large fine
- The deal with prosecutors would bring an end to years-long investigations by US regulators into Binance while allowing the company to continue running
Binance CEO Changpeng ‘CZ’ Zhao has agreed to plead guilty to anti-money laundering charges as part of a deal with the Department of Justice that will see the crypto exchange pay $4.3billion to end the criminal probe against the company.
The founder of the world’s largest crypto currency exchange also agreed to step down as Binance CEO during a hearing in Seattle on Tuesday. However, he reportedly plans to maintain majority ownership of the firm, founded in 2017.
The court has also recommended Zhao pay a $50 million fine.
Binance will also reportedly plead guilty to a criminal charge and agree to the hefty $4.3billion fine, which includes amounts to settle civil suits by regulators against the company.
Zhao is expected to be sentenced at a later date.
The deal with prosecutors brings an end to years-long investigations by US regulators into Binance while allowing the company to continue running.
Binance CEO Changpeng ‘CZ’ Zhao plans to plead guilty to money laundering as part of a deal with the Department of Justice
Zhao and others were charged with violating the Bank Secrecy Act by failing to put in place an anti-money laundering program and for violating US economic sanctions.
The deal aims to allow Binance to continue to operate instead of collapsing, which would negatively affect markets and crypto holders.
The US government was seeking to find a balance between cracking down on Binance and disrupting the sector altogether after several high-profile collapses last year, including the bankruptcy of Binance’s former arch rival FTX.
Binance has been under the Justice Department’s scanner since at least 2018.
An indictment unsealed in Tuesday and seen by CNBC says Binance is charged with including conducting an unlicensed money transmitting business, violating the International Emergency Economic Powers Act, and conspiracy.
Federal prosecutors asked the company in December 2020 to provide internal records about its anti-money laundering checks, along with communications involving Zhao.
The DOJ probe is one of a string of legal and regulatory headaches the world’s biggest crypto exchange faces in the United States.
In June, the Securities and Exchange Commission sued Binance and Zhao, accusing them of operating an ‘elaborate scheme to evade U.S. federal securities laws.’
The SEC alleged in 13 charges that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The lawsuit prompted investors to pull around $780 million from the crypto exchange, forced the company to eliminate about one third of its US workforce and trading balances have slowed to a trickle.
Zhao was an early FTX investor and withdrew just days before its collapse. He is seen with convicted fraudster, FTX founder Sam Bankman-Fried
Data firm Nansen said that Binance saw net outflows of $778.6 million of crypto tokens within 24 hours of the SEC lawsuit filing, and Binance registered net outflows of $13 million.
Binance denied the SEC’s allegations and said it would ‘vigorously defend’ its platform.
The SEC lawsuit against Binance came roughly eight months after the collapse of FTX, which was also accused of co-mingling customers’ funds and investing the proceeds in high-risk investments that customers were unaware they were participating in.
Days before FTX collapsed, Zhao said Binance would liquidate its FTT tokens, a cryptocurrency issued by FTX.
The Binance announcement triggered a run on the bank at FTX – but the company didn’t have enough money to pay investors who wanted to withdraw their assets as customers tried to withdraw $6 billion in 72 hours.
Bankman-Fried was eventually convicted of massive fraud against FTX costumers.