Prosecutors say Binance Holdings Ltd. had lax controls on cryptocurrency trading on its exchange, allowing terrorists, hackers and sanctions violators to use the exchange to transfer billions of dollars over the years. Binance and CEO Changpeng Zhao pleaded guilty to criminal charges on Tuesday, admitting that they failed to implement basic anti-money laundering measures that are the cornerstone of governments’ efforts to curb the flow of black money around the world. Binance will pay a fine of US$4.3 billion, while Zhao Peng will resign as CEO and personally pay a fine of US$50 million.
The stunning turn means Changpeng Zhao, the world's most powerful cryptocurrency figure, faces up to 18 months in prison and will no longer be in charge of the industry's largest exchange. It follows a multi-year investigation by federal prosecutors that saw Sam Bankman-Fried, the founder of the collapsed FTX exchange, convicted of fraud earlier this month.
According to the Department of Justice and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), Binance employees engaged in a series of misconduct and that many of them knew the consequences of allowing these huge amounts of money to be illegally traded.
"Binance turned a blind eye to its legal obligations in the pursuit of profits. Its willful failure allowed funds to flow through its platform to terrorists, cybercriminals, and child abusers," Treasury Secretary Janet Yellen said in a statement.
The U.S. government alleges that as a result of these failures, Binance allowed the following to occur:
The al-Qassam Brigades, the military wing of Hamas, uses Bitcoin transactions to raise funds for the Palestinian resistance movement. Hamas, which has been designated a terrorist organization by the United States, killed more than 1,200 Israelis on October 7. According to FinCEN, Binance did not file a suspicious activity report with the United States regarding Hamas fundraising.
FinCEN said Binance allowed Bitcoin transactions with other terrorist groups, including Al Qaeda and ISIS. The company admitted that at least 1.1 million transactions worth $899 million were conducted by people living in Iran, in violation of U.S. sanctions.
Binance admitted that users of the exchange in Cuba and Syria, as well as in Ukraine’s Crimea, Donetsk and Luhansk regions, initiated millions of dollars in transactions in violation of U.S. sanctions.
The company said Binance users deposited $275 million from BestMixer, a cryptocurrency platform that helps cover up digital currency traces. Dutch authorities shut down the platform in 2019, saying it "could be used to hide and launder criminal financial flows."
The company admitted that customers transferred $106 million in Bitcoin from the Russian darknet market HydraMarket to Binance wallets between 2017 and 2022. U.S. and German authorities seized Hydra's servers in 2022, calling it the world's largest and most famous darknet market. It sold hacking software, fake IDs and illegal drugs such as heroin, cocaine and LSD.
Binance addresses processed tens of millions of dollars in transactions involving 24 types of ransomware, such as SamSam, Satan and WannaCry. FinCEN said that while the company cooperated with law enforcement when notified, it prevented authorities from obtaining critical information about these attacks. In 2021, the United States indicted three North Korean military hackers over the WannaCry attack.
FinCEN said more than 1,000 transactions involved three marketplaces that traded child pornography and related materials. The administrator of one of these sites, DarkScandals, was prosecuted in 2020. The site mainly features violent rape videos.
Related articles: