Zhao Waves Farewell to Binance CEO Role in a $4.3 Billion DOJ Deal

In November 2022, FTX collapsed, and Sam Bankman-Fried’s road to ruin began. The crypto market at the time was already on a route, down -66% from its August 2021 all-time highs. 📺

CZs tweet in November 2022 triggered another wipeout in crypto, with the total market cap dropping -27.5% over seventeen days, extending the total loss from the all-time high to -76%. 

In one year, two things: tried SBF and found him guilty. Then they pulled off a somewhat less dramatic but nonetheless major takedown (via massive fines and settlement) of Binance and its now former CEO, CZ. 

According to the presser released by the DOJ, here’s a quick rundown of what went down:

  • Binance Pleads Guilty: Binance Holdings Limited pleaded guilty to anti-money laundering, unlicensed money transmitting, and sanctions violations.
  • Historic Penalty: Binance agreed to pay over $4 billion to resolve the Justice Department’s investigation, marking one of the largest corporate penalties in U.S. history.
  • CEO’s Guilty Plea: Changpeng Zhao, Binance’s CEO, also pleaded guilty to failing to maintain an effective anti-money laundering program and resigned as CEO.
  • Coordinated Resolutions: The plea is part of coordinated resolutions with the Department of Treasury’s FinCEN, OFAC, and the U.S. Commodity Futures Trading Commission (CFTC).
  • Attorney General’s Statement: Attorney General Merrick B. Garland emphasized that Binance’s rise was partly due to its criminal activities and stressed the consequences of using technology to break the law.
  • Treasury Secretary’s Remarks: Janet L. Yellen highlighted Binance’s willful legal failures, allowing money to flow to terrorists and other criminals through its platform.
  • Deputy Attorney General’s Warning: Deputy Attorney General Lisa O. Monaco warned crypto and DeFi companies about the importance of complying with U.S. law.
  • Intentional Violations: Binance and Zhao willfully violated anti-money laundering and sanctions laws, threatening U.S. financial systems and national security.
  • Binance’s Growth Strategy: Binance prioritized growth and profits over compliance, knowingly operating without anti-money laundering safeguards and allowing illegal transactions.
  • Forfeiture and Fine: Binance agreed to forfeit $2.51 billion and pay a criminal fine of $1.81 billion, totaling a financial penalty of $4.31 billion. They also agreed to retain an independent compliance monitor for three years and enhance their anti-money laundering and sanctions compliance programs.
  • Zhao’s Role: Zhao admitted to prioritizing Binance’s growth over compliance, causing illegal transactions, and failing to implement effective anti-money laundering protocols. 📻

A few hours after the Binance and CZ news came out, Coinbase’s CEO, Brian Armstrong, took to X:

From the perspective of gaining, keeping, and acquiring the US crypto customer base, Coinbase is sitting pretty nicely right now. 

Update

Fast forward to this late Tuesday evening/early Wednesday morning, CZ made bond. 🗞️

  • Bond Amount: CZ Zhao will pay a $175 million release bond.
  • Return to the U.S.: He agrees to return to the United States 14 days before his sentencing on February 23, 2024, potentially allowing him to go back to Dubai in the interim.
  • Residence Information: Zhao is required to inform the court of his residence location.
  • Arrest Warrant: An arrest warrant could be issued if Zhao fails to appear in court.
  • Penalty for Non-Appearance: Failure to appear in court could result in a $250,000 fine and a maximum jail term of 10 years.
  • Trust Account Deposit: Zhao has deposited $15 million in a trust account, separate from his bond, which he will forfeit if he does not adhere to the bond conditions.
  • Guarantors: Two guarantors are involved, who will respectively post $250,000 and $100,000.
  • Guilty Plea: Zhao pleaded guilty to a violation of the Bank Secrecy Act, which typically carries an 18-month sentence. However, there’s a possibility of a longer sentence being considered.
  • Bail Order Review: The U.S. is set to review Zhao’s bail order. If a judge denies the review, the order becomes effective on November 27 at 5 pm Washington time. If reviewed before that date, Zhao must remain in the U.S. until a decision is reached.
  • Background Context: Zhao has been based in Dubai for several years. While there’s no formal extradition treaty between the U.S. and the UAE, a bilateral agreement exists for law enforcement cooperation.
  • Related to Binance Settlement: Zhao’s bond arrangements are part of the aftermath of a $4.3 billion settlement between Binance and the U.S., which led to Zhao stepping down as Binance’s CEO and paying a $50 million fine.

We’ll update this thread as it this situation continues to develop. 📰

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Technically Speaking – February 21, 2024

My first Litepaper and first Technically Speaking since my short break and the transition to a new newsletter service have me swamped. 🥵

But there was no way I was not going to a Technically Speaking – so we’ll keep this one short and sweet. 

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