Binance Sees $956m Funds Withdrawn, After CEO Pleads Guilty

Binance Holdings has seen a financial impact after agreeing with US authorities to settle an anti-money laundering investigation.

On Tuesday this week, Binance Holdings reached a $4.3 billion (£3bn) settlement with the US Justice Department (DoJ) to resolve its years-long criminal investigation into the world’s biggest cryptocurrency exchange, as well as its co-founder and chief executive Changpeng Zhao.

In addition to the huge fine, founder and CEO Changpeng Zhao, known as CZ, “pleaded guilty to failing to maintain an effective anti-money laundering (AML) program”. CZ agreed to personally pay $50 million as part of the settlement deal.

Binance settlement

Besides the $4.3bn it owes to US authorities, there has been a mini bank run on Binance itself.

Reuters, citing market data, reported that investors had pulled about $956 million from Binance over a 24 hour period since news of the settlement broke.

Zhao has been replaced by Richard Teng, a senior Binance executive who joined in 2021.

Meanwhile the settlement with US authorities, has raised questions as to whether Zhao will send any time in prison.

Zhao has been allowed to keep his vast fortune (he is worth $10.2bn) and his shareholding in Binance, the exchange he founded in 2017, raising questions about how much influence he could continue to exert on Binance under the terms of the settlement.

Zhao was born in China but is a Canadian citizen who resides in the United Arab Emirates (UAE). He reportedly entered his plea in a Seattle courtroom on Tuesday.

Reuters reported that as Binance strived for market dominance, it shunned key checks that Zhao believed would turn customers off, authorities said.

The crypto exchange reportedly failed to report more than 100,000 suspicious transactions, including with organisations the US described as terrorist groups such as Hamas, and never reported transactions with websites dedicated to selling child sexual abuse materials.

According to Reuters, Changpeng Zhao faces a maximum prison sentence of 18 months under federal guidelines and has agreed not to appeal any sentence up to that length.

Prison sentence

US prosecutors will take a position on how much jail time to seek closer to Zhao’s 23 February 2024 sentencing hearing in Seattle, a Justice Department spokesperson was quoted as stating on Wednesday.

“But we do reserve the right to seek a sentence above the guidelines,” the statement added.

A court filing reportedly showed that Zhao paid a $175 million bail bond, with another $15 million held in a trust account. He has agreed to return to the United States 14 days before sentencing.

Reuters could not immediately ascertain his whereabouts on Wednesday.

At Tuesday’s hearing, Zhao’s lawyers said he would remain in the Seattle area through Monday evening, and would be able to then return to the UAE, provided the district judge did not object to his agreement with the government, another DOJ spokesperson was quoted by Reuters as saying.

Later on Wednesday, federal prosecutors urged a federal judge to block Zhao from leaving the continental United States prior to his February sentencing, saying in a court filing that Zhao posed a serious flight risk despite his bail conditions.

“There is no combination of conditions sufficient to protect against the risk of flight and ensure Zhao’s return” for sentencing, the prosecutors reportedly said.