Binance Founder Changpeng ‘CZ’ ZhaoResigns After Pleading Guilty ToViolating Bank Secrecy Act
On Tuesday, Binance founder and former CEO Changpeng “CZ” Zhao pleaded guilty to violating the Bank Secrecy Act after federal officials alleged he directed Binance to allow U.S. customers to use the platform without conducting proper know-your-customer or anti-money laundering checks.
According to court filings, he has now been released from custody on a $175 million dollar personal recognisance bond.
In addition to the bond, CZ has reportedly posted $15 million held in a trust account by Davis Wright Tremaine and agreed to forfeit funds if he violates the terms of his release.
The terms of release include being present in the United States 14 days prior to his sentencing hearing which is scheduled for Feb. 23, 2024 at 9zm Pacific Time.
Other terms include regular restrictions on breaking the law, tampering with witnesses or victims or taking any non-prescribed controlled substances.
Because Zhao pleaded guilty pursuant to an agreement, he waived his right to appeal any sentence over 18 months, Magistrate Judge Brian Tsuchida said in court Tuesday. According to another court filing, the DOJ and Zhao agreed to a $50 million fine, but no prison time was mentioned.
Zhao resigned from Binance, the exchange he founded in 2017, as part of the company’s settlement with the U.S. Department of Justice on Tuesday. Binance will pay $4.3 billion in penalties to various federal agencies and allow multiple monitors to oversee its operations through the next five years.
Alongside the DOJ, Binance settled charges with the Financial Crimes Enforcement Network (FinCEN), Office of FOreign Asset Control (OFAC), and Commodity Futures Trading Commission – respectively, the U.S.’s money laundering watchdog, sanctions watchdog and federal commodities regulator.
“This is one of the largest penalties we have ever obtained from a corporate defendant in a criminal matter,” Attorney General Merrick Garland said during a press conference on Tuesday.
Binance Saw $1 Billion In NetOutflows Over The Last 24 Hours
Following Binance’s settlement with regulators and CZ’s guilty plea, the world’s largest crypto exchange experienced a significant uptick in withdrawals. According to data from DefiLlama, Binance’s 24-hour outflows topped $1 billion as of 3:30 pm Hong Kong time on Wednesday.
However, it doesn’t seem like the exchange will experience a bank run since data shows it sits on over $67 billion worth of tokens.
Of the total outflows experienced by Binance, $605.9 million came across the Ethereum, BNB chain, Avalanche, Fantom, and Polygon networks, according to separate data compiled by Nansen.
Meanwhile, OKX enjoyed net inflows of around $152 million in the past 24 hours, giving it the largest daily inflow today, followed by Bybit’s $50.9 billion and Bitstamp’s $30.5 million, according to DefiLlama.
Binance’s native token BNB fell 9.1% in the past 24 hours to trade at $234.3, CoinGecko data showed.
Jason Atkins, chief commercial officer of crypto market maker Auros, said there is a second-order effect around market sentiment as “developments, such as the fines levied on Binance by the DOJ, are indicative of the positions of various regulatory bodies when it comes to historical infractions.”
“We anticipate that this will accelerate the outflow of projects, exchanges, founders and firms from direct U.S. regulatory purview,” Atkins said. “Compliance will now be a non-negotiable so as to minimize lapses in the AML and KYC requirements in the U.S., irrespective of the country of incorporation.
Despite the heavy blow dealt to its business in the U.S., Binance has already tried to frame a vision for its future:
“[When] Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have.” the company said in a blog post published today. “Over the past two years, we have worked hard to restructure our organization and personnel and upgrade our systems.”
According to a recent email received by creditors of the defunct Bitcoin exchange Mt. Gox, Nobuaki Kobayashi – the trustee overseeing the Mt. Gox estate, is planning to start repaying some creditors back a collective “shortly” in cash.
The email stated,
“The Rehabilitation Trustee plans to commence repayment to creditors shortly. The Rehabilitation Trustee is making efforts to commence repayments in cash within the 2023 calendar year. However, due to the large number of rehabilitation creditors who will receive repayment, the varying types of repayments will continue into 2024. For these and other reasons, the specific timing of repayment to individual rehabilitation creditors is undetermined, and therefore, it will not be possible to provide advance notice to each rehabilitation creditor regarding the specific timing of their repayment.”
Mt. Gox is a now-defunct Bitcoin exchange that lost 850,000 BTC to a hack in 2014.
The reports of this repayment came as the Mt. Gox trustee announced the redemption of trust assets on Nov. 22. According to the official document, the rehabilitation trustee received the redemption of 7 billion Japanese yen ($47 million) to fund the repayment of the claims.
The statement noted that the trust assets after such redemption amounted to 8.8 billion yen, or roughly $59 million.
The rehabilitation trustee will continue preparations to make the base repayment, early lump-sum repayment, and the intermediate repayment,” the announcement notes.
The latest Mt. Gox events have triggered many reactions in the community, with many commentators noting that the new email from the Mt. Gox trustee sounds “cautiously promising” and interprets it as “finally happening.”
Some Mt. Gox community members also brought attention to the United States Securities and Exchange Commission (SEC) suing of Kraken on Nov. 21. This major crypto exchange has been largely involved in the repayment of Mt. Gox hack victims.
“Imagine Kraken collapsing just before receiving Mt. Gox coins. Another ten years,” one Reddit user wrote.
Despite a significant part of the community getting excited about the recent Mt. Gox events, some observers still have expressed skepticism about the repayment due to the long history of failing to make repayments.
The Mt. Gox trustee was previously expected to repay the exchange’s creditors by the end of October 2023. In September 2023, the trustee officially moved the repayment deadline to October 2024.
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