The CEO of Binance Pleads Guilty to Fraud Charges
Binance is an online cryptocurrency exchange widely trusted by users around the world. The platform even has its own cryptocurrency, BinanceCoin, which users of the platform can use to pay for fees and receive bonuses.
Because of its popularity, the world was shocked in June 2023 when the platform froze all the funds of US customers. Supposedly, the platform had been skirting AML and KYC regulations for years, resulting in a fraud charge by the SEC.
But how has the CEO of Binance reacted? Read on to learn about the latest developments in the Binance vs SEC case.
The Beginning: All Binance Assets Frozen
As we mentioned above, this story started in June 2023 when the SEC ordered Binance to stop serving customers, and Binance announced it would freeze all US funds. This came about as the SEC found the platform to be in violation of AML and KYC laws, allowing customers to use the platform for money laundering.
While the vast majority of the platform users weren’t laundering money, it has since been discovered that several terrorist organizations, namely Hamas (which is currently causing problems in Israel), had been using the platform for nefarious purposes.
While the SEC ordered an immediate asset freeze, like most judicial proceedings in the United States, the court case didn’t begin immediately, especially since the CEO of Binance, Changpeng ‘CZ’ Zhao, lives in another country. It wasn’t until October 17th, 2023, that Binance officially froze all US assets and locked any American customers out of their accounts.
In the meantime, Changpeng Zhao, who holds Canadian and UAE passports, made plans to travel to the US for the court case, effectively turning himself in rather than trying to run as others involved in cryptocurrency court cases have tried to do.
Related: What is Binance Coin (BNB)? Basic Overview
The Middle: The Court Case
On November 21st, 2023, before formal proceedings began, the CEO of Binance pleaded guilty to all the charges against him, likely because the US government had a strong case. The most notable of Zhao’s charges was money laundering, leading to hefty settlement charges. As of the writing of this article, Changpeng Zhao and Binance have been ordered to pay the SEC and CTFC a grand total of $4.3 billion US dollars.
Because of this ruling, Changpeng Zhao has stepped down as CEO of Binance (also likely to separate himself from the company) and has agreed to pay $50 million of the settlement from his own money.
What was surprising, however, is that Changpeng was not locked up after pleading guilty. Rather, he was released, but asked to remain in the US until it comes time for sentencing in February. This has angered some individuals involved in the court case as they believe Changpeng would flee the charges and evade his punishment by returning to the UAE, where the US has no extradition treaty.
It doesn’t seem like, however, that this is Changpeng’s MO. If you consider all the facts in the case, Changpeng turned himself in originally, meaning if he was likely to run, he would have done it already. The prosecuting attorney on behalf of the US is less than certain, but the fact remains that Changpeng has paid his bail and has been released to await sentencing.
The End: What Comes Next?
As the court case winds down, Changpeng faces up to 10 years in prison in addition to the hefty settlement he is paying. But will he actually have to serve jail time?
The answer to that question is unclear, and it likely won’t be known until after sentencing in February 2024. In the meantime, he has asked to stay in the US, which as of November 27th, 2023, this is a directive he seems to be following.
What Happens to Binance Customers?
The answer to this question is a bit of a mixed bag. Americans on the platform were all previously warned about the asset freeze and should have removed their funds prior to October 17, 2023. Those that didn’t will need to contact customer service for more information on the next steps to take. New American customers won’t be able to make an account on the platform.
For customers outside the US, there is a bit of a different story. On one hand, Binance as a platform is still legal in many countries, but this court case will definitely dig into profits, and there is no telling if the future of the platform is bright or grim.
With Changpeng stepping down, a new CEO will have to step up, and it is unclear if the company will still be in the green following such a massive settlement. International customers may notice cost-cutting measures, and there is a chance (although slim) that Binance will go under completely.
For those with current Binance accounts, even non-Americans, we recommend looking at other cryptocurrency exchange platforms. While there is no need to exit Binance just yet, it’s important to be prepared in case the platform does eventually announce closure.
It is also important to keep up with cryptocurrency news, whether on MintDice.com or another site, as the cryptocurrency world is constantly changing. It took only 5 short months from the announced SEC charges to be filed for American customers to be booted off the Binance platform. And if Binance goes insolvent like FTX, the process could go even faster.
We recommend subscribing to several cryptocurrency news outlets like CoinDesk and BitcoinNews so you can be the first to know if Binance becomes a concern. Until then, it seems as if non-US customers can continue to trade their crypto on Binance like normal.
Overall, we have always liked Binance as a platform, and we hope they are able to pull through this legal issue. But like many cryptocurrency platforms which have come before we are wary and recommend that any remaining users have an exit or backup plan in mind if they plan to continue using Binance.
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