Changpeng Zhao, the founder and CEO of Binance, the world’s largest cryptocurrency exchange, has agreed to step down from his executive role, as well as plead guilty to charges of violating U.S. anti-money-laundering laws.
The crypto exchange, which Zhao launched in 2017, has been the subject of prolonged investigations in the wake of a criminal probe that loomed over it even as it gained market share following the collapse of FTX, a major competitor, last year.
Zhao’s decision to step down and plead guilty is part of a broader agreement aimed at preserving Binance’s operational capabilities and long-term viability amidst legal challenges. Zhao will be replaced as CEO by Richard Teng, previously Binance’s global head of regional markets.
Zhao is set to make his plea in a federal court in Seattle on Tuesday afternoon. Under his leadership, Binance emerged as a pivotal player in the global cryptocurrency market. However, the company has faced ongoing scrutiny, particularly.
Alongside Zhao’s personal plea, Binance itself is poised to admit guilt to a criminal charge. This admission comes with a hefty price tag, with the exchange expecting to pay fines totaling $4.3 billion, including settlements for civil allegations levied by various regulatory bodies.
This year, Binance witnessed a notable exodus of its executives, and the company has had to reduce its workforce significantly as it grappled with the implications of the U.S. investigations.
Under the terms of the deal, while Zhao will maintain his majority ownership of Binance, his role will no longer be at the helm of the company. His sentencing will be scheduled for a later date following his court appearance.
This scenario bears resemblance to a previous case involving BitMEX, a Seychelles-based crypto derivatives trading platform. Arthur Hayes, the former CEO of BitMEX, also entered a guilty plea for similar violations and received a two-year probation sentence.
The U.S. Justice Department, at this time, has chosen not to comment on the matter.
It’s important to note that the agreement set to be announced does not encompass a settlement with the Securities and Exchange Commission (SEC). The SEC previously sued Binance and Zhao, alleging violations of U.S. investor protection laws. Major crypto exchanges like Binance have been inclined to contest the SEC’s claims, arguing that cryptocurrencies do not fall under the SEC’s regulatory purview.
The Department of Justice’s investigation into Binance scrutinized the exchange’s measures to counteract money laundering and its compliance with sanctions, particularly concerning trades involving individuals from countries like Iran and Russia.
In addition to the criminal proceedings, Binance and Zhao are also addressing a civil lawsuit filed earlier this year by the Commodity Futures Trading Commission (CFTC). This regulatory body has accused Binance of failing to implement adequate systems to prevent terrorist financing and money laundering. Moreover, the CFTC alleges that Binance allowed U.S. residents to access certain derivatives, such as futures or swaps, which should be traded on regulated platforms. Binance’s failure to register with U.S. regulators made these transactions illegal.
Zhao’s status and his negotiations with the U.S. government had been a key point of contention over the past months. This recent turn of events represents a significant shift in the cryptocurrency landscape, highlighting the increasing intersection of digital finance and regulatory oversight.
Editor’s note: This is a developing story and will be updated.