Changpeng Zhao, founder of Binance, the world’s largest cryptocurrency exchange, has agreed to plead guilty to money laundering violations, according to court documents made public on Tuesday, a blow to the most powerful and influential figure in the global crypto industry.
Binance itself also agreed to plead guilty and pay $4.3 billion in fines and restitution, according to documents filed in federal court in Seattle.
As part of his guilty plea, Mr. Zhao agreed to pay a fine of $50 million and will also resign as CEO of the company. Binance, as part of its plea deal with federal prosecutors, will agree to the appointment of a supervisor, and Mr. Zhao is prohibited from any involvement in Binance’s business until three years after he appoints the supervisor.
The court documents, which are dated Nov. 20, say federal prosecutors filed criminal charging documents against Binance and Mr. Zhao on Nov. 14. Mr. Zhao’s lawyers could not be reached for comment.
Court documents described an extensive effort by Mr. Zhao and other senior Binance employees to avoid laws requiring them to refrain from transacting with people excluded from the US financial system due to economic sanctions, and to properly register any US-based businesses. US regulators. Clients from Iran, Cuba and Syria, all of which face sanctions, were able to access the Binance platform.
In addition to the prohibited foreign transactions, Binance did business with US-based companies even though it was not supposed to have any US customers on its Binance.com platform. Instead, a different platform, Binance.US, which was also owned by Mr Zhao, was required to run the business and comply with US anti-money laundering laws. But Mr. Zhao and other Binance employees believed it would be better for the leading cryptocurrency exchange to handle large American clients, according to court documents.
According to the documents, Mr. Zhao, widely known as CZ, personally sought to conceal Binance’s dealings with large American clients (who were referred to as VIPs and managed by a special manager) so that “U.S. supervisory agencies would not be able to access them.” “U.S. won’t cause any problems.” “
The filing cited a June 2019 call during which Zhao advised other Binance employees to speak to US-based VIP clients using methods such as phone calls that would leave “no trace” of the interactions.
For the relatively young and fast-growing crypto world, Tuesday’s proceedings were a monumental development, given Binance’s global reach and Mr. Zhao’s prominent role as a leader in the industry. At times, Binance has processed two-thirds of all digital currency transactions, making it a vital power broker and broker in the world of cryptocurrencies.
Long considered the richest man in crypto, Mr. Zhao has often been cagey about his whereabouts even when he has. accumulated more than 8.5 million followers on X, the platform formerly known as Twitter. Earlier this year she spent time in the United Arab Emirates, which does not have an extradition agreement with the United States.
Zhao’s attorneys at Latham & Watkins were not immediately available for comment.
Mr. Zhao’s guilty plea completed something of a double whammy by the Justice Department. Earlier this month, crypto entrepreneur Sam Bankman-Fried was found guilty of fraud in a criminal trial stemming from the collapse of his FTX crypto exchange.
Since the implosion of FTX a year ago, federal authorities have criminally charged a cavalcade of cryptocurrency executives, and the Securities and Exchange Commission has filed lawsuits against some of the largest companies in the industry, including Coinbase, the US exchange which is listed on the stock exchange. On Monday, the SEC sued Kraken, another crypto exchange, accusing it of operating without proper registration and of commingling customer deposits with its own corporate assets.
This is a developing story. Please check back for updates.
Alan Rappeportcontributed reports.