Changpeng Zhao, the leader of the largest cryptocurrency exchange globally, has resigned from his position as Binance CEO and acknowledged guilt in violating U.S. anti-money laundering laws. This decision comes as part of a resolution to a lengthy, multi-agency investigation into the company. Zhao publicly acknowledged on what was once called Twitter that he had committed errors during his time at the helm of the company.
“I accept responsibility, as this decision is in the best interest of our community, Binance, and myself,” he stated. According to Bloomberg, Zhao was reported to have appeared at a federal court in Seattle to finalize the agreement.
As part of the settlement, Zhao’s company will acknowledge guilt in a criminal charge, admit wrongdoing, and pay fines exceeding $4 billion, as reported by The Wall Street Journal on Tuesday, citing individuals familiar with the situation.
The agreement is expected to permit Binance to continue its operations, with Zhao retaining majority ownership of the company. Although he won’t serve as an executive anymore, he expressed his intention to continue providing consultation services.
In the same communication, Zhao revealed that Richard Teng, the head of regional markets at the company, would take over as the new CEO. Teng, in his statement on Tuesday, emphasized his commitment to “reassuring users” about the company’s future and expressed a dedication to “collaborating with regulators.”
“The foundation upon which Binance stands today is stronger than ever,” Teng affirmed. “We are here to stay.”
Zhao, known as “CZ” in the crypto industry, emerged as one of its most prominent figures, potentially eclipsed only by his chief rival, the disgraced former FTX CEO, Sam Bankman-Fried. Operating from the United Arab Emirates, Zhao has served as a global spokesperson for the industry, asserting a commitment to establishing new benchmarks for regulatory compliance. Back in 2018, a representative from Binance expressed the hope that the company could act as an “inspiration” for the industry to enhance its adherence to regulations.
However, the reality painted a different picture. In 2022, Reuters disclosed that Binance had not fully disclosed information to regulators and maintained lax anti-money laundering protocols. A 2019 message from Karen Leong, then serving as Binance’s global money laundering reporting officer, revealed Zhao’s preference for “no KYC” (know-your-customer checks), which are designed to combat money laundering in financial platforms. “Reduce KYC. Raise Limits. BEST COMBO,” Leong emphasized in the same communication, with Binance refuting any allegations of wrongdoing at the time.
Tuesday’s deal involves multiple federal agencies, including the Department of Justice, Commodity Futures Trading Commission, and Treasury Department. The investigation encompasses various charges, such as Binance enabling Americans to trade with individuals from sanctioned entities like Iran and Russia. Additionally, the firm faces accusations of bank fraud from the Justice Department.
Established in 2017 in China by the Canadian citizen Zhao, Binance swiftly rose to become a global powerhouse in the cryptocurrency industry. While the firm’s holding company is situated in the Cayman Islands, Binance has consistently asserted having no official headquarters and has maintained a high level of secrecy regarding its operational locations. Excluding U.S. investors, Binance initiated Binance.US, headquartered in Florida, following the departure of the CEO and chief risk officer of Binance.US in September.
Although many in the cryptocurrency sector might view a settlement, even with potential criminal charges against Zhao, as a positive development, Binance’s challenges are likely far from resolved. The Securities and Exchange Commission (SEC) is presently suing Binance on multiple counts, including operating unregistered exchanges, providing inaccurate information about trading controls and oversight, and selling unregistered securities.
The SEC contends that Binance permitted specific high-value U.S. customers to engage in trading on its global platform, which is explicitly intended to exclude U.S. investors. Additionally, the regulator alleges that Zhao and Binance exercised discretionary control over customer funds, diverting billions of dollars to entities owned by Zhao.
The act of commingling funds and surreptitiously redirecting them to entities under the control of the exchange owners closely parallels the circumstances that contributed to the downfall of Bankman-Fried’s FTX. Despite the legal challenges, Binance is actively contesting the lawsuit.
On Tuesday, Zhao sought to identify positive aspects where available, highlighting that, at least in this particular instance, U.S. agencies did not accuse Binance of misappropriating user funds or engaging in market manipulation.
“Funds are SAFU!” he reassured, employing a cryptocurrency term for safety.
Zhao announced on Tuesday that he plans to step back from the startup scene, take a break, and subsequently shift his focus to passive investments in blockchain, AI, and biotech. Additionally, he expressed a willingness to offer private mentoring to entrepreneurs, stating, “If for nothing else, I can at least tell them what not to do.”
Requests for comments directed to spokespeople for both Binance and the Department of Justice were not immediately answered.
