Binance has reached a landmark settlement in its long-running legal battle in the United States, signaling a dramatic change in its operations. On November 21, the world’s largest crypto exchange complied with US authorities after choosing to exit the American market.
The resolution comes with a $4.3 billion fine, a significant financial setback for Binance. The most surprising development was Changpeng Zhao’s (CZ) resignation as CEO, a part of the settlement terms with the US Department of Justice (DOJ).
The Settlement With DoJ
This historic agreement with the US regulators stipulates a $4.3 billion settlement, setting a record in the legal history of the crypto space. Binance’s complete withdrawal from the United States’ digital asset market is also required under the terms of this settlement, as is a lengthy payment schedule.
The agreement requires the payment of $1.81 billion within 15 months, followed by $2.51 billion in asset forfeiture. Besides the financial implications, reports indicate that the exchange will undergo a radical internal revamp.
The regulator expects Binance to ensure regulatory adherence by appointing an independent compliance monitor for three years, a vital component of the recent agreement. On Tuesday, the Binance CEO entered a guilty plea to Bank Secrecy Act violations at the US District Court for the Western District of Washington. CZ resigned before the settlement was made public.
Under the settlement terms, the exchange founder will also pay a $50 million fine from his assets. Richard Teng, Binance’s former Global Head of Regional Markets, will serve as interim CEO.
DoJ Allege Violations of Federal Laws
The US Department of Justice reportedly charged Binance with violating US federal law to maximize profits. According to the DoJ’s Attorney General Merrick B. Garland, the exchange enabled terrorist organizations to facilitate nearly $900 million in transactions, a violation of US sanctions.
In a joint press conference with Treasury Secretary Janet Yellen and Deputy Attorney General Lisa Monaco, stated that by failing to comply with US rules, Binance made it easy for criminals to move funds through the platform. Based on the settlement terms, the exchange must file regular operational reports of suspicious activities and other unreported illegal transactions to the DoJ.
Binance Exits US Market
Binance faces significant consequences from its recent agreement, which includes a complete exit from the US market. This huge fine stems from the exchange’s highly secretive efforts to cater to US users while avoiding scrutiny from regulatory bodies.
Moreover, the DoJ asserted that 16% of the firm’s user base is from the US. The Attorney General explained, “Binance resorted to relabeling US users as ‘UNKWN’ or ‘unknown,’ deleting their US identities.”
DoJ’s Investigation Of Binance
The DoJ’s extensive investigation into Binance, which began in 2018, focused on allegations that the crypto giant violated US anti-money laundering regulations and sanctions. These allegations include facilitating unlicensed money transmission, laundering conspiracy, and criminal sanctions violations.
Initially, Binance refuted these charges, attributing shortcomings to outdated compliance protocols. The firm also pledged an unwavering commitment to raising industry standards while strengthening its mechanisms to detect illegal cryptocurrency activity on its platform.
While the DoJ and the Commodities Futures Trading Commission (CFTC) agreed with the arrangement, the Securities and Exchange Commission (SEC) ignored the settlement. As a result, the SEC will continue its separate charges against Binance.
Meanwhile, the commission’s legal action against Binance for operating an unlicensed exchange remains unresolved, suggesting that the company’s woes with the US authorities aren’t over yet.
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