The plea agreement(s)
According to an article from Ballard Spahr, Binance Holdings Limited has agreed to plead guilty to violating the Bank Secrecy Act (BSA) by neglecting to uphold anti-money laundering cryptocurrency technology, not registering as a money service business (MSB), and lastly, by triggering violations of U.S. economic sanctions established under the International Emergency Economic Powers Act (IEEPA) (Hardy, Grugan & Danch, 2023). Although Binance has pleaded guilty, they still plan to “continue to operate,”(Hardy, Grugan & Danch, 2023).
According to Ballard Spahr’s article, Changpeng Zhao, Binance’s founder, has also “pleaded guilty to a single count of failing to maintain an effective AML program, in violation of 31 USC § 5318(h)” (Hardy, Grugan & Danch, 2023). As per the terms of his plea deal, Zhao has resigned from his position as CEO, with indications that he will retain ownership of his shares in Binance.
What is Binance?
Binance is the “world’s largest leading cryptocurrency exchange, catering to 50 million registered users in over 180 countries” (Binance). Changpeng Zhao founded Binance in 2017 in Shanghai. Later, Binance moved to Tokyo and then to Malta, but the company holdings are currently registered in the Cayman Islands. Binance users can trade, buy, sell, and earn interest on crypto. Users can also purchase or earn new tokens and trade, stake, and loan Non-Fungible Tokens (NFTs). NFTs are unique digital assets that represent ownership linked to blockchain technology.
Allegations and fines unraveled
The basis of the case is Binance pretending that they did not operate in the United States when they were. According to the article from Ballard Spahr, Binance “served over one million U.S. customers (and actually employed over 100 personnel based in the U.S.)” (Hardy, Grugan & Danch, 2023). Binance also never filed a Suspicious Activity Report (SAR), which the BSA requires. According to Ballard Spahr, Binance services such as “at least $890 million in transactions involving Iran over the course of several years” were used illegally (Hardy, Grugan & Danch, 2023).
In response, “Binance has agreed to forfeit $2,510,650,588 and to pay a criminal fine of $1,805,475,575 for a total criminal penalty of $4,316,126,163” (Hardy, Grugan & Danch, 2023). Binance has also agreed to civil consent agreements with the FinCEN, CFTC, and OFAC. To combat this problem in the future, Binance has set forth a plan to incorporate compliance involving an independent compliance monitor.
On the other hand, in the DOJ’s press release, Binance founder Zhao said that it’s “better to ask for forgiveness than permission,” and prioritized Binance’s growth over compliance with U.S. law.” (Hardy, Grugan & Danch, 2023).
The court has been recommended to fine Zhao $50 million. Since this is only a recommendation, the court can change or decide not to follow the current recommendations. The court may also increase or lower the sentence and fine the court feels most appropriate.
Anti-money laundering cryptocurrency technology
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