By Lukas I. Alpert
The agreement, which would hit the crypto exchange with a $4.3 billion fine, would leave a path for the firm to continue without its charismatic founder
Binance cofounder Chaopeng Zhao, one of the most prominent figures in crypto, will plead guilty to criminal charges related to violating U.S. anti-money-laundering requirements, and agree to step down as head of the company, as part of a broad settlement with the U.S. Department of Justice, according to reports.
The plea deal with federal prosecutors, which would be accompanied with a $4.3 billion fine on Binance itself, would allow a path for the crypto exchange to continue without its charismatic founder running operations, according to the Wall Street Journal. Zhao would retain is majority ownership in Binance.
The agreement with the U.S. Department of Justice and other U.S. regulators is expected to be announced by Attorney General Merrick Garland at a press conference in Washington at 3 p.m. ET.
Messages sent to representatives of Binance and the DOJ weren’t immediately returned.
The deal would bring to a close a years-long probe into the crypto exchange — the world’s largest — and would be the latest major U.S. action against major crypto businesses as U.S. authorities have sought to rein them in.
Earlier this month, federal prosecutors secured a significant fraud conviction of Sam Bankman-Fried, the founder of FTX, one of the biggest crypto exchanges that collapsed last year along with $8 billion in customer money.
In June, the department of justice filed fraud charges against Alexander Mashinsky, the founder of Celsius, a major crypto exchange that collapsed in 2022.
Zhao — who is widely known simply as CZ — has described past efforts by U.S. regulators as broad overreach over issues the company says it had long been working to resolve with U.S. authorities. He is not a U.S. citizen and has never been based in the U.S.
Earlier this year, the CFTC filed a lawsuit against Binance and Zhao, alleging they went to great lengths to do business with U.S. customers while not following U.S. regulations.
The suit spelled out a litany of alleged offenses that harkened back to wild west days of cryptocurrencies where no rules applied, despite Binance claiming it was playing by the rules.
The suit said the firm had built several methods to allow customers in the U.S. to do business on their exchange, but did little to comply with U.S. financial regulations.
The Securities and Exchange Commission filed its own lawsuit against Binance a few months later, alleging that a separate U.S. trading operation the exchange created strictly for American customers that was in line with U.S. regulations, was all window dressing that continued to allow U.S. customers to trade on the much more loosely regulated overseas exchanges and sidestep American regulatory oversight.
The suit painted a picture of a trillion-dollar exchange operated entirely around the whims of its peripatetic founder, with the sole aim of avoiding any kind of regulatory scrutiny.
-Lukas I. Alpert
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11-21-23 1244ET
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