It feels like Earth-shattering developments upending the entire crypto industry are becoming a November tradition! Last year, it was FTX’s collapse. This year, it’s Binance paying billions.
What happened: The world’s largest crypto exchange, will pay US$4.3 billion after pleading guilty to charges of money laundering, unlicensed money transmitting, and sanctions violations. As part of the deal, founder Changpeng “CZ” Zhao will step down as CEO.
- The Chinese-Canadian billionaire also pled guilty to a felony money laundering charge, surrendering himself despite living in the UAE, a country without a U.S. extradition treaty.
Catch-up: The U.S. Department of Justice (DOJ) has been investigating Binance since 2020, and today it unveiled a whole wack of financial crimes committed by the firm. Most notably, Binance allowed the trading of funds from sanctioned countries like Iran and Syria.
- Binance isn’t out of the woods yet. It’s still facing separate lawsuits from the U.S. Securities Exchange Commission and Commodity Futures Trading Commission.
Why it matters: This settlement allows Binance to keep operating (albeit with its coffers $4 billion lighter) rather than face a potential shutdown from criminal sanctions. That’s good news, not just for Binance but for the crypto industry, which just avoided a minor apocalypse.
- Binance is a pillar of the crypto world, owning a ~40% market share and responsible for as much as two-thirds of all transfers on centralized crypto exchanges.
- “If FTX[‘s collapse] wasn’t the end of consumer crypto as we know it, the collapse of Binance definitely would be,” crypto journalist Jacob Silverman told WIRED.
Bottom line: The DOJ has prosecuted two powerful ex-crypto CEOs within a month of one another, which should serve as a warning shot to all crypto criminals.—QH
