A fine of $4.3 billion, Zhao Changpeng resigns, summarizing all information points on Binance's settlement with U.S. regulators

Author: Luccy, Kaori, BlockBeats

BlockBeats reported on November 22 that Binance announced a resolution with the U.S. Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control (OFAC), and the Financial Crimes Enforcement Network (FinCEN) regarding historical registration, compliance, and sanctions issues. This resolution marks the company's acknowledgment of past criminal compliance violations and indicates that it will use this as an opportunity to lay the foundation for the next 50 years of development.

Subsequently, Binance founder CZ announced his resignation as CEO. The company has prohibited him from participating in its operations for three years from the date of his appointment as monitor. Binance must strengthen its compliance program and appoint an independent monitor for a term of three years. After the plea agreement, the CEO and Chief Compliance Officer of Binance must demonstrate compliance with the terms of the plea agreement.

CZ stated in a tweet that while this decision was emotionally difficult, he must take responsibility for past mistakes for the sake of the community, Binance, and personal interests. He believes that Binance has a strong team and will continue to grow and optimize.

Total Amount Exceeds $4.3 Billion, Shared by Four Regulatory Agencies

Binance will pay a $1.8 billion fine and agrees to pay within 15 months of the judgment. An additional $2.5 billion in funds will be forfeited, part of which is related to transactions with U.S. users, while another part is related to transactions involving Iran, to be paid within a specific timeframe after the judgment. The total amount forfeited is $4.368 billion.

The FinCEN settlement agreement stipulates a civil penalty of $3.4 billion, imposes a five-year regulatory period, and requires significant compliance commitments, including ensuring Binance completely exits the U.S. market. The OFAC settlement agreement stipulates a fine of $968 million and requires Binance to comply with a series of strict sanctions compliance obligations, including full cooperation with oversight by FinCEN.

According to Forbes reporter reports, the DOJ and CFTC will receive part of the fines from the two aforementioned settlement agreements:

In the $3.4 billion settlement with FinCEN, FinCEN will ultimately receive $780 million in fines and $1.5 billion in forfeited funds, while the DOJ and CFTC will receive $2.47 billion.

In the $968 million settlement with OFAC, OFAC will receive $70 million, and the DOJ will receive $898 million in fines.

In response, Binance co-founder He Yi told BlockBeats, "This is basically the number they (the regulators) deemed affordable." Previously, He Yi tweeted on X, emphasizing that U.S. regulators did not accuse Binance of misappropriating user funds or engaging in market manipulation, and further stated that Binance would commit to further strengthening compliance measures and continuously building and developing its platform.

CZ personally faces a $50 million fine, which will be deducted from the amount paid to the CFTC if paid before the judgment date.

CZ Pays Record Bail, Sentence May Not Exceed 18 Months

CZ appeared in federal court in Seattle today. According to the plea agreement, CZ will admit to violating the Bank Secrecy Act (BSA) and other related laws, and is prohibited from making any public statements that contradict his plea or the facts of the case. However, CZ was released after posting a $175 million personal bond, one of the largest bail amounts in history. The sentencing hearing is scheduled for February 23, 2024, at 9:00 AM Pacific Time (February 24, 1:00 AM Beijing Time).

At 10 AM today, GeekWire disclosed photos of Binance founder CZ appearing in Seattle court.

According to Bloomberg reports, CZ faces a maximum of 10 years in prison, but under the plea agreement, the sentence is expected to be no more than 18 months. The DOJ has not made a final decision on the length of his imprisonment, and the defense attorney stated in court that sentencing would be delayed by six months.

In a document released on Tuesday, Binance was charged with three counts, including violating money laundering regulations, conspiracy to operate an unlicensed money transfer business, and violating U.S. sanctions regulations. Binance will admit to operating an unlicensed remittance business, violating the BSA, and engaging in prohibited transactions with Iran. Binance agrees to the facts stated in the plea agreement and commits to fully cooperating with the government.

Like CZ, Binance cannot make public statements that contradict their responsibilities or the facts described in their respective plea agreements.

The U.S. Treasury stated that Binance's violations included failing to prevent and report suspicious transactions related to terrorists, including Hamas, the Palestinian Islamic Jihad, al-Qaeda, and the Islamic State in Iraq and Syria. Court documents show that Binance allowed at least 1.1 million related transactions, totaling over $898 million, involving Iranian customers.

U.S. Attorney General Merrick Garland stated in a statement, "The message should be clear: using new technology to break the law does not make you a disruptor; it makes you a criminal." U.S. Treasury Secretary Janet Yellen stated, "Any entity, wherever located, that seeks to benefit from the U.S. financial system must comply with the rules that protect us all from terrorists, foreign adversaries, and criminals, or face consequences."

According to a statement from the U.S. Treasury, as part of the settlement with FinCEN, Binance will "completely exit" the U.S. and appoint a five-year monitor to oversee the exchange's sanctions compliance program. During this period, the U.S. Treasury will have access to Binance's records and systems. If Binance fails to fulfill these obligations, it may face additional significant fines, including a $150 million deferred fine, which FinCEN will impose if Binance fails to comply with the required compliance commitments and regulatory terms.

However, Binance US is unaffected and operates independently from the aforementioned Binance.

CZ Writes Open Letter in Response, Rich Teng Takes Over Binance

After the settlement news was announced this morning, CZ published a lengthy open letter on X. In the letter, he wrote that Binance is enhancing its compliance and governance as part of its commitment to ensure improved security, transparency, compliance, and future growth. Binance has always worked tirelessly to protect user assets and security and has made significant progress in organizational structure, system upgrades, and compliance standards. Importantly, the resolution from U.S. agencies did not accuse Binance of misappropriating user funds or market manipulation.

The new CEO will be Richard Teng, the former global regional market head of the company. Richard Teng stated that his focus will be: 1. To reassure users that they can have confidence in the company's financial strength, security, and safety; 2. To work with regulators to uphold high standards globally, promote innovation, while providing essential consumer protection; 3. To collaborate with partners to drive the growth and adoption of Web3, and we will persist.

CZ pointed out that Binance's new leadership team has a strong compliance background and will lead the company into the next phase of growth. Meanwhile, Binance is committed to strengthening cooperation with law enforcement agencies, increasing transparency, and laying the groundwork for the long-term development of the cryptocurrency industry.

Related: “Full Text of CZ's Open Letter: This is the Best Choice”

New CEO Richard Teng expressed his deep honor and humility in accepting this role. As the world's largest cryptocurrency exchange with over 150 million users and thousands of employees, he will take this responsibility seriously and cherish the trust of everyone. With the support of CZ and the leadership team, he accepted this position with the aim of meeting and exceeding the expectations of all stakeholders and fulfilling the company's core mission—financial freedom.