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:
Since the founding of Coinbase back in 2012 we have taken a long-term view. I knew we needed to embrace compliance to become a generational company that stood the test of time. We got the licenses, hired the compliance and legal teams, and made it clear our brand was about trust…
— Brian Armstrong (@brian_armstrong) November 21, 2023
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. 📰