A Deep Dive into Binance’s $4.3 Billion Fine, Leadership Changes, and Ongoing Legal Battles
On 21 November 2023, Binance CEO Zhao Chang Peng pleaded guilty to violating US money laundering laws.
Consequently, the company faced a monumental fine of US$4.3 billion, marking one of the largest penalties ever imposed on a US corporation.
Following this legal setback, Zhao resigned from his position, and his sentencing is scheduled for 23 February 2024. As part of the plea deal, he personally incurred a substantial US$50 million fine and is prohibited from any further involvement with the company he founded.
The reins of Binance have now been passed to Singaporean Mr Richard Teng, the former head of all regional markets outside the US, who steps into the role of the new CEO.
A Brief Recap of the Previous Chapter
For a comprehensive overview of the entire controversy, you can refer to our detailed article here. But let me give you the TL;DR.
Binance is a global company founded in 2017 that operates (well, operated, I guess) the largest cryptocurrency exchange. So what happened to this giant?
Binance, driven by greed for profit and in blatant disregard for its legal responsibilities (quotes Treasury Secretary Janet Yellen), was found to be facilitating the transfer of funds to some terrible –and very illegal– entities.
This includes cybercriminals, terrorist organizations and individuals that involve the exploitation of minors on their platforms.
Yellen revealed that Binance facilitated over 1.5 million currency trades violating US sanctions and failed to report over 100,000 suspicious transactions, including those associated with US-designated terrorist groups.
(In other words, Binance has committed some very messed up stuff, and this was just the TL;DR…)
In addition to the substantial fines, Binance faces a five-year supervision period, during which they must diligently report any suspicious activities as mandated by law.
Binance’s Legal Troubles are Far from Over, Though
With the man behind it duly punished after pleading guilty, it may sound like the story has been wrapped up in a neat little bow, but there are still many challenges ahead for this digital marketplace.
Newly appointed CEO Mr Teng has to not only navigate the five-year monitoring period but also confronts an ongoing lawsuit with the US Securities Exchange Commission (SEC).
As of 25 November 2023, Binance and Zhao have admitted guilt to various regulators, including the Department of Justice, the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, and Office of Foreign Asset Control.
However, the SEC has 13 charges pressed against Binance, and these charges remain to be addressed.
These charges include Binance not clearly separating its US and international businesses as required by regulations, and allowing money laundering and other illicit activities to take place at the crypto exchange.
The SEC accuses Zhao of participating in “an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Known for its strict stance on the cryptocurrency industry, the SEC has a history of aggressively policing crypto firms due to the industry’s failure to comply with regulatory standards, as noted by Enforcement Director Gurbir Grewal.
It is currently unclear how Binance’s lawsuit with the SEC will turn out, but we can only tell you that this is not the best time to become a cryptobro.
If this is too confusing, you can watch this instead:
Safe to say that Binance has a lot of work to do to regain public trust.
As if the US$4.3 billion in fines were not enough, investors have also added insult to injury by pulling almost US$1 billion from Binance in the 24 hours following Zhao’s fall from grace.
Despite Mr. Teng’s extensive experience as a financial regulator within Binance, leading the company post such a significant financial setback presents a monumental task. Nevertheless, the newly appointed CEO remains optimistic about the future.
He expresses in his welcome speech that he intends to “use everything (he’s) learned over the past three decades of financial services and regulatory experience to guide (their) remarkable, innovative, and committed team.”
Mr Teng adds that he will focus on three points: rebuilding consumers’ trust in the security and safety of the company, collaborating with regulators to uphold high standards of protection and working with partners to perpetuate growth.
Mr. Teng concludes his speech on a hopeful note, “We are here to stay. Please lend me your support. Excited for the days ahead!”