Binance pleads guilty, fined $4.3B over widespread U.S. law violations

The Department of Justice (DOJ); Treasury Department, including the Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC); and Commodity Futures Trading Commission (CFTC) made the announcements at a joint press conference Tuesday.

“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed—now it is paying one of the largest corporate penalties in U.S. history,” said Attorney General Merrick Garland.

Officials from the DOJ and the other agencies stressed Binance willfully evaded U.S. laws that require financial institutions to set up AML programs and file suspicious activity reports (SARs) if they suspect customers are attempting to facilitate crimes using transactions on their platforms.

“Binance vaulted to the top of the crypto market in part through the scheme exposed today: by pursuing growth, market share, and profits at the expense of compliance with U.S. law,” said Deputy Attorney General Lisa Monaco. “… A corporate strategy that puts profits over compliance isn’t a path to riches. It’s a path to federal prosecution.”

Binance agreed to pay the fines and work with compliance monitors to improve its AML and sanctions compliance programs. The actions by the government will not shut down Binance’s operations but will severely curtail them while ensuring the exchange’s complete exit from the United States.

The details: In pleading guilty to the DOJ’s charges of violating the Bank Secrecy Act (BSA), International Emergency Economic Powers Act, and failing to register as a money transmitting business, Binance agreed to forfeit approximately $2.5 billion and pay a criminal fine of about $1.8 billion. The company received a 20 percent reduction on its penalty for cooperation, including steps taken to remediate its compliance program.

FinCEN’s $3.4 billion fine, the largest penalty in the Treasury’s history, punished Binance for “willfully operat[ing] as an unregistered money services business while obscuring its ties to the U.S. and maintaining its most commercially important U.S. customers,” said the agency in a press release. Since its founding in 2017, Binance never filed a SAR as required under the BSA.

OFAC imposed a record fine of more than $968 million for apparent sanctions violations committed by Binance between August 2017 and October 2022. The exchange executed nearly 1.7 million virtual currency trades worth approximately $706 million on its Binance.com platform between U.S. persons and users in sanctioned jurisdictions—including Iran, Syria, North Korea, Cuba, and the Crimea Region of Ukraine and two other Ukrainian regions—and blocked persons, OFAC said in its settlement agreement.

The Treasury said transactions on Binance’s platforms supported the financial activities of terrorist groups, including Hamas’s Al-Qassam Brigades, the Palestinian Islamic Jihad, Al Qaeda, and ISIS; ransomware attackers; money launderers; and other criminals.

The CFTC ordered Binance to disgorge $1.35 billion in ill-gotten gains and pay a $1.35 billion fine to settle charges it violated the Commodity Exchange Act by not registering as a digital assets derivative exchange, according to a press release. The CFTC announced charges against Binance in March.

Compliance considerations: Binance agreed to a three-year independent compliance monitorship as part of its plea agreement with the DOJ.

The exchange will be subject to a five-year monitorship imposed by FinCEN, during which the Treasury will retain access to its books, records, and systems. Failure to comply with the agency’s requirements could net the exchange an additional $150 million suspended penalty.

Other legal matters: In federal court, Binance founder and former CEO Changpeng Zhao pleaded guilty to failing to maintain an effective AML program in violation of the BSA. He agreed to pay a fine of $150 million to the CFTC.

The CFTC also fined Binance’s former chief compliance officer, Samuel Lim, $1.5 million for allegedly aiding and abetting the exchange’s misconduct. Lim had been named in the agency’s lawsuit back in March, with messages he allegedly sent proving particularly damning.

A separate lawsuit filed by the Securities and Exchange Commission in June against Binance and Zhao remains pending.

Binance response: “These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations and allow our company to turn the page on a challenging yet transformative chapter of learning and growth,” the company said in a press release. “… We have learned valuable lessons that are applicable across the industry in support of crypto users. We acknowledge that, alongside compliance, transparency is essential to rebuilding industry confidence amid challenging market conditions and industry mismanagement.”

Binance introduced Richard Teng as its new CEO in a separate release.