Binance Fined a Record $4.3 Billion; CZ Pleads Guilty to Money Laundering

Crypto with Lorenzo
7 min readNov 22, 2023
Image by Nadezda Murmakova on Shutterstock

Binance has now settled with the U.S. Department of the Treasury (The Treasury) via the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC) and the IRS Criminal Investigation (CI) regarding reported violations of US anti-money laundering and sanction laws.

In a press release circulated yesterday, The Treasury informed the public about Binance’s infringements, particularly failing to stop transactions with “terrorists, ransomware attackers, money launderers and other criminals.”

How much is the settlement? All up, it is a whopping $4.3 billion. An astounding $3.4 billion is the largest settlement in The Treasury’s history. On top of this, Binance will have to pay the OFAC $964 million.

How many transactions are we talking about? How far back do these go? According to the same announcement:

“Between August 2017 and October 2022, Binance executed more than 1.67 million virtual currency trades on its Binance.com platform between U.S. persons and users in sanctioned jurisdictions and blocked persons.”

U.S. Department of the Treasury

Changpeng Zhao (“CZ”) charges and a change of guard at Binance

The biggest shake-up to the company is the departure of Changpeng Zhao (a.k.a., “CZ”), the co-founder and CEO of the company since its inception in 2017 in China. It will soon be headed by Richard Teng, who has been working as its Global Head of Regional Markets.

Moreover, CZ is facing potential criminal charges as he reportedly pleaded guilty to money laundering and has agreed to pay a $50 million fine.

On top of this, there’s the possibility that he could be sent to jail for his actions. As reported by CoinDesk, “he waived his right to appeal any sentence over 18 months.”

Source: CZ Binance on X (Twitter)

US regulators, politics and TradFi

BlackRock, JP Morgan Chase and other financial institutions want their piece of the crypto pie. The USA’s take-no-prisoners approach to the previously mentioned crypto exchanges, with many lawsuits in recent years, will please any TradFi entities looking to boost their presence in this emerging market.

Rest assured, I am not the only one who believes this to be the case. Altcoin Daily, Lark Davis, Tony Edward (Thinking Crypto) and other commentators shared similar thoughts. Ivan on Tech shares his two cents about this and the broader picture.

A question that crypto commentators and enthusiasts will be asking is where CZ will get incarcerated.

Another one is how much lower crypto will go in the USA. I don’t mean price-wise; I mean the treatment of crypto exchanges and other related entities in the world’s largest economy that have been trying to get regulatory clarity for several years.

CryptoWendyO, a prominent crypto commentator, didn’t mince her words when expressing her discontent with this entire crypto situation in the USA, including Gensler and Co.’s allegedly favourable treatment of SBF and FTX, compared to Coinbase, Kraken, Gemini, Binance, Ripple, Grayscale, etc.

Here are some excerpts from Wendy O’s latest video.

“I think that people should be penalized for committing crimes…but what we’re seeing happen in the crypto industry is appalling. It really is; it’s disgusting.

CZ has officially been extorted. He is stepping down from Binance, and I think that he will do some jail time.

My next problem is why was Gary and the SEC meeting with Sam Bankman-Fried and allowed FTX to happen.”

I agree with most of that, including the US Government’s treatment of crypto. As per jail time, I won’t speculate on whether he will or won’t be put behind bars for up to 10 years.

Over the years, I’ve had a neutral opinion of him. With the latest money laundering revelations, it is concerning to see. However, there is most likely more to the story than what is being reported, and I do not see CZ as a villain.

What really grinds my gears is how this has been dragged out for several years when the USA should have gotten its s&$t together by now for the sake of its residents, especially as other countries are progressing towards implementing crypto-friendly rules for individuals and businesses.

Of course, this is wishful thinking. Very powerful and influential vested interests stand between the crypto firms listed earlier and US regulators, often siding with the latter.

Between the US SEC’s losses vs Ripple* and Grayscale to date — an embarrassing outcome for Gary Gensler — and this aggressive attack on US crypto firms from regulators and some notable politicians, these companies are getting fed up.

As a result, they’ve been forced to seek greener pastures elsewhere, which I believe is ultimately for their own good.

*Yes, on paper, it was a partial victory for Ripple. Despite this, I consider it a big ‘L’ for Gary Gensler.

Source: Binance on X (Twitter)

The silver lining(s) to all of this

It always helps to explore the benefits of all of this amidst the doom and gloom.

The timing here is crucial. I’m glad it occurred now and not in a fully-fledged bull market (some will say we are, and others will argue that we’re still in an accumulation phase).

The case appears to have been settled now. The exchange will pay the fine, proceed with caution to appease US regulators moving forward and continue serving their clients outside the US.

As per a related news release, Binance’s time is up in the USA.

“FinCEN’s consent order assesses a civil money penalty of $3.4 billion, imposes a multi-faceted five-year monitorship overseen by FinCEN, and requires significant compliance undertakings, including undertakings to ensure Binance’s complete exit from the United States.”

FinCEN

More information about this resolution and other changes made by the company is available through an official blog post.

Another positive to this story is that Binance won’t collapse, at least not for the foreseeable future and not due to this lawsuit.

They can harness their expertise to continue operating their exchange in over 100 countries worldwide and recoup the losses from this settlement.

— Binance can begin redirecting more resources to non-US markets and expanding its user base globally.

Additional thoughts

I believe regulators have timed this to send Binance and other crypto exchanges a strong message on behalf of TradFi.

What message? The major one is that they won’t make it easy for these crypto entities to gain an advantage over banks, asset managers, and others from the legacy financial system wanting to capitalise on the rapid growth of crypto and blockchain tech.

One must not destabilise the gravy train for those who have benefited immensely from decades of favourable monetary policies and rules.

TradFi is clearly annoyed with the meteoric rise of Binance in just a few years. For context, it launched several years after Kraken and Coinbase (2011 and 2012, respectively) and even after Gemini (2015). Yet, CZ’s brainchild went on to become the largest exchange in the world and maintain the top spot…and by a long shot.

Consistently handling billions of dollars in daily BTC/crypto trading volume over several years equals a massive loss for another company…and this is just one exchange of the hundreds around the world, including over a dozen major ones.

For any Bitcoin/crypto noobs, if there’s one thing you need to understand and remember, it is this:

Bitcoin, Ethereum and other decentralised digital assets will continue even if Binance, Coinbase, Kraken or another exchange collapses.

Case in point: FTX. When the s&$t finally hit the fan (spinning at full speed), did BTC, ETH, XRP, etc., collapse?

No. Prices fell, weak hands panicked, sold their assets for no good reason, and diamond hands/whales seized the opportunities.

What matters more than anything is having strong fundamentals for Bitcoin or your preferred blockchain, not to mention good tokenomics per se for its native coin.

In other words, is the network secure and sufficiently decentralised?

As I wrap up, this situation emphasises two more important things:

  • Never assume that an exchange is too big to fail. Even though Binance has not failed, it is nonetheless a massive financial penalty and bad publicity, at least in the short term. You never know if the government abruptly forces them to cease operating in the US, let alone any jurisdiction.
  • The idea of decentralisation should extend to your BTC/crypto holdings. Never have everything in one place. Additionally, you should have a significant portion of digital assets managed under a non-custodial wallet, where you have full control of the private keys.

Disclaimers

• N.B. None of this is financial advice; I am not a financial advisor. You are ultimately responsible for crypto investments, let alone in any asset class.

• The opinions expressed within this piece are my own and might not reflect those behind any news outlet, person, organisation, or otherwise listed here.

• I received no incentive to speak about these individuals or companies mentioned throughout this. Moreover, I have no affiliation with them other than using their crypto services.

• Please do your research before investing in any crypto assets, staking, NFTs, or other products affiliated with this space.

  • For transparency, I no longer hold BNB. It accounted for less than 10% of my crypto portfolio even when I did.

Originally published at https://www.cryptowithlorenzo.com.

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Crypto with Lorenzo

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