It’s been eight days since Changpeng Zhao, the founder of the giant crypto exchange Binance, stepped down and pleaded guilty to breaking U.S. anti-money laundering laws. Prosecutors said the $4.3 billion settlement deal was one of the largest corporate penalties in U.S. history.
The new CEO, Richard Teng, will have plenty to do. Binance is still facing an ongoing SEC lawsuit. Also, as part of last week’s deal, U.S. authorities will subject Binance to five years of “financial monitorship” by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
This means FinCEN will have access to Binance’s books, records and systems and will oversee any changes needed to make Binance compliant with anti-money laundering and sanctions rules. Lawyers and former regulators say these steps are unusual, challenging and costly. Still, investors say Binance should be able to handle the additional compliance costs, and the cost of the U.S. fines. Teng posted on social media on Wednesday: “The fundamentals of our business are VERY strong.”
In the aftermath of Zhao’s guilty plea, Binance saw some $956 million of outflows, according to data firm Nansen, who said this was small relative to the more than $65 billion of assets remaining on Binance.
Zhao entered his plea in Seattle, in the U.S., and his lawyers asked the U.S. judge to allow him to return to his home in the United Arab Emirates while he waits to be sentenced. But a judge ruled on Monday that he must stay in the U.S. for the time being.
Then on Wednesday, the Philippines’ Securities and Exchange Commission said it was blocking access to Binance in the country. The regulator said the operator of Binance was not a registered corporation in the Philippines and was operating without a licence to sell any form of securities. It also asked Google and Meta to ban online advertisements from Binance in the country, and warned those convincing people to invest in the platform that they may be held criminally liable.
Illicit finance continues to be a key topic for the crypto world. One blockchain network has come under particular scrutiny recently. Financial crime experts and blockchain investigators interviewed by Reuters said that a blockchain called Tron has overtaken Bitcoin as the platform for crypto transfers associated with groups designated as terror organisations by Israel, the U.S. and others. A Reuters analysis of the crypto seizures announced by Israel’s security services since 2021 show that Israel is increasingly targeting wallets based on the Tron network.
Tron said: all technologies could “in theory be used for questionable activities,” citing as an example U.S. dollars being used for money laundering. Tron also said it did not have control over those using its technology and that it was not linked to the groups identified by Israel. Full story here.
Although experts say that crypto is a relatively small part of terrorist financing, the U.S. has previously said it’s taking preemptive action to prevent the technology being more broadly used for illicit finance. For more on crypto’s role in terrorist financing, click here.
