Binance, one of the world's largest cryptocurrency exchanges, has been in the spotlight in recent years. There are reports that a long-running investigation by the U.S. Department of Justice may be coming to an end, but the exchange faces a potential huge fine.
The U.S. Department of Justice is seeking a fine of more than $4 billion from Binance as part of a proposed settlement of its long-running investigation into the world's largest cryptocurrency exchange, according to people familiar with the matter. The talks between the Justice Department and Binance involve the possibility that Binance founder Changpeng Zhao could face criminal charges in the United States as part of a probe into alleged money laundering, bank fraud and sanctions violations.
In fact, the Department of Justice's investigation into Binance began in 2018, focusing on whether Binance violated U.S. anti-money laundering laws and sanctions. At least six federal prosecutors are involved, and some prosecutors believe that they have collected enough evidence to take active action against Binance and file criminal charges against individual executives, including founder Zhao Changpeng, while other prosecutors believe that time is still needed to review more evidence. Due to differences among prosecutors, the U.S. Department of Justice's protracted criminal investigation into Binance may still not be concluded.
In March, the U.S. Commodity Futures Trading Commission (CFTC) sued Binance, accusing the exchange of "deliberately circumventing" U.S. commodity laws and accusing Binance and Zhao of operating an "illegal" exchange and a "sham" compliance program. In June, the U.S. Securities and Exchange Commission also filed a lawsuit, accusing Binance and Zhao Changpeng of mishandling customer funds, misleading investors and regulators, and violating securities rules.
For nearly half a year, Binance has been denying the allegations of US regulators and said it would "vigorously defend" its platform. Zhao Changpeng stressed that the allegations "do not fully state the facts." After being accused by US regulators, Binance witnessed the loss of executives and a decline in market share. At least a dozen executives left the exchange, including Binance's chief strategy officer, general counsel, and chief product officer.
Binance has disputed the lawsuits, saying it has actively cooperated with regulators' investigations and expressed disappointment with the enforcement actions. In recent months, Binance's U.S. law firm Gibson Dunn has met with Justice Department officials several times. Binance's defense includes that criminal prosecution will deal a severe blow to the cryptocurrency market, which has been in a long downturn. The discussions between the two sides also involved possible plea options. The Justice Department may file a lawsuit against Binance and its executives and reach a settlement through negotiations, or it may close the case without taking action.
While the U.S. regulator’s investigation into Binance is nearing its end, the situation remains uncertain. Binance has not yet responded to media requests for comment, and the U.S. Department of Justice declined to comment. Zhao Changpeng currently lives in the UAE, and although the country has no extradition treaty with the United States, he may voluntarily go to the United States if the matter can be effectively resolved. However, Binance may be required to pay a fine of more than $4 billion, which would be one of the largest fines in a criminal cryptocurrency case. The investigation is jointly led by the Criminal Justice Department’s Money Laundering and Asset Recovery Section, the National Security Division, and the U.S. Attorney’s Office in Seattle.
The settlement is intended to strike a balance that allows Binance to continue operating without risking its collapse and negatively impacting the market and cryptocurrency holders. If Binance and the U.S. Department of Justice agree to a deferred prosecution agreement, the Department of Justice will bring criminal charges against the company. However, as long as the company meets the specified conditions, including paying a substantial fine and agreeing to a statement of facts detailing its misconduct, the United States will not proceed with the prosecution and will establish a process to monitor the company's compliance.
In addition to money laundering and bank fraud, the Justice Department is investigating whether Binance assisted in evading sanctions against Iran and Russia and whether it allowed transactions that funded Hamas. The investigation is one of the largest investigations of cryptocurrency companies by the Justice Department, and it is unclear whether Binance's top executives face charges.
Summarize
The criminal investigation of Binance by the U.S. Department of Justice (SEC and others are all civil investigations) has always been an unresolved "big thunder" in the industry and the biggest difficulty faced by Binance. Now that things have made new progress, reaching a settlement with the U.S. Department of Justice that includes regulatory terms may be a compromise that protects investors and allows Binance to move towards a more institutionalized and compliant future. This is not only a big boon to the industry, but also removes potential obstacles after the bull market starts.
