CEO of world’s largest cryptocurrency exchange expected to plead guilty to money laundering violations

Billionaire Changpeng Zhao, CEO of the world’s largest cryptocurrency exchange, Binance,

is expected to plead guilty to money laundering violations as part of a settlement with the US government that would ease the intense cloud of legal scrutiny hovering over the company, a person familiar with the matter tells CNN. Binance is also expected to expected to plead guilty to the charges.

As part of the agreement, Binance has agreed to pay $4.3 billion in fines and other penalties, a second source tells CNN.

Zhao, the founder and CEO of Binance, has amassed a fortune that Bloomberg pegs at more than $23 billion.

Treasury declined to comment. Binance did not respond to requests for comment.

What Binance allegedly did wrong

Federal prosecutors unsealed court records on Tuesday alleging Binance, led by Zhao, processed transactions by customers who operated illicit mixing services and “laundered proceeds of darknet market transactions, hacks, ransomware, and scams.” Prosecutors allege that Binance had lax anti-money laundering procedures.

This alleged misconduct paved the way for Binance to become king of the crypto exchanges, prosecutors allege.

“In part because of this scheme, and because Defendant prioritized growth, market share and profits over compliance with US law (Binance) became the largest cryptocurrency exchange in the world,” prosecutors said.

Prosecutors allege Binance, “knowingly failed” to register as a money service business, willfully violated the Bank Secrecy Act by failing to implement and maintain an effective anti-money laundering program, and willfully caused violations of US economic sanctions.

The charges, filed in the US District Court for the Western District of Washington, accused Binance of a “deliberate and calculated effort to profit from the US market without implementing controls required by US laws.”

Prosecutors allege the misconduct started as early as August 2017, continued until at least October 2022, and included certain Binance officers, directors, employees, and agents.

What is Binance?

Binance was founded in 2017 by Zhao, a Canadian national. US market regulators this year brought civil cases against Binance, which they accuse of running an illegal exchange for unregistered securities in the United States. The Securities and Exchange Commission in June sued Binance, saying the company ran an “extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”

Binance has long argued that it isn’t subject to US laws because it doesn’t have a physical headquarters in America.

The SEC also alleged that Zhao and Binance commingled customer assets and even diverted some to an entity controlled by Zhao.

Zhao claims that the company’s headquarters are wherever he is at any point in time, “reflecting a deliberate approach to attempt to avoid regulation,” according to a complaint by the Commodity Futures Trading Commission. That agency accused Binance and Zhao of violating US derivatives trading laws in multiple ways, including allegedly secretly coaching “VIP” customers within the United States on how to evade compliance controls.

A spokesperson for Binance said in June that the company takes the SEC’s allegations seriously, but it believes the agency’s accusations are “unjustified.”

“We respectfully disagree with the SEC’s allegations that Binance operated as an unregistered securities exchange or illegally offered and sold securities,” the company said in a statement. “Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a US regulatory tug-of-war.”