CZ Steps Down as Binance CEO: What Went Wrong However, CZ will continue to remain a shareholder and a consultant to the team for compiling U.S. agency resolutions

By Paromita Gupta

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Changpeng Zhao also known as CZ, pleaded guilty to the charges of anti-money laundering violations and sanctions violations brought by multiple US regulatory agencies. He would be stepping down as the CEO of Binance, the largest cryptocurrency exchange in terms of trade volume.

CZ took to X early Tuesday morning to officially share the news, "I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself."

Richard Teng, the Global Head of Regional Markets, Binance will be succeeding CZ as the CEO of the world's largest cryptocurrency exchange. "Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has."

However, CZ will continue to remain a shareholder and a consultant to the team for compiling U.S. agency resolutions.

Binance faced anti-money laundering and sanctions violation charges pressed by the Department of Justice. The breakthrough by the DoJ in this five-year-long investigation into Binance will see the latter agree to the charges, pay a fine of USD 4.3 billion, and have CZ removed as the head to continue its operations.

Apart from DoJ, Binance will settle charges brought by Commodities Futures Trading Commission; the Department of Treasury's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC).

The charges were made for violating the Bank Secrecy Act, lack of registration as a money-transmitting business, and violating the International Emergency Economic Powers Act.

What went wrong?

Established in 2017, Binance has had DoJ tailing them for close to five years.

"From the very beginning, Zhao and other Binance executives engaged in a deliberate and calculated effort to profit from the U.S. market without implementing the controls required by U.S. law," said Attorney General Merrick B. Garland in a public statement.

Reportedly, the US market makes up 20-30 per cent of Binance's potential revenue.

In May 2021, it was reported that DoJ and the Internal Revenue Service were investigating Binance.

The scrutiny on crypto exchanges has doubled post the collapse of FTX. Between August 2017 and April 2022, direct transactions worth appx USD 106 million in Bitcoin were done by Hydra, a Russian darknet marketplace known to facilitate illegal activities. The crypto platform banned Hydra only in April 2022.

Matters escalated in 2023 when in March the Commodity Futures Trading Commission charged Binance with several violations with regard to the Commodity Exchange Act (CEA) and CFTC regulations. In May, Binance withdrew its operations from Canadian soil.

June saw Binance be slapped with allegations and operational trouble on a weekly basis. The United States Securities and Exchange Commission filed 13 charges which included secretly allowing high-value U.S. customers to continue trading on the platform and asserting control over customer assets.

Later, it withdrew its registration with Cyprus' Unit Crypto Service and quit The Netherlands, after failing to acquire a virtual asset service provider license. Its French unit also comes under scrutiny.

Binance Markets Limited (BML), Binance's United Kingdom arm, cancelled its registration with the Financial Conduct Authority for activities that it never carried out or offered in the UK. In July, Binance withdrew its application for a crypto license in Germany.

In August, it was reported that monthly transactions worth USD 90 billion were carried out in the banned China market by Binance. It re-entered the Japanese market after a short hiatus. Binance has also exited the Russian market as reported earlier this month.

"Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform," Treasury Secretary Janet Yellen during a press conference. Allegedly, Binance is said to facilitate billions of dollars' worth of unregulated cryptocurrency transactions.

"Binance's guilty plea is part of coordinated resolutions with the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) and the U.S. Commodity Futures Trading Commission (CFTC)," read a DoJ release.

Binance will also be paying USD 3.4 billion to FinCEN and USD 968 million to OFAC. CZ has been released from custody on a personal recognizance bond worth USD 175 million. Currently residing in UAE which does not have an extradition treaty with the US, CZ will return to the States 14 days prior to his sentence hearing on Feb. 23, 2024.

Paromita Gupta

Features Writer with Entrepreneur India

Covering news and trends in AI and Metaverse segments. An avid book reader running her personal blog on the side. You may reach me at paromita@entrepreneurindia.com. 

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