Few figures in the cryptocurrency space have made as much of an impact in recent years as Changpeng Zhao, also known as CZ, and Binance, the company he founded in 2017.
Not only is Binance the largest cryptocurrency exchange in the world, but it also dwarfs its competitors by orders of magnitude. Binance held nearly 60% of the market share for spot cryptocurrency trading until recently. No other exchange even comes close, even though that share has decreased to nearly 40% since US regulators increased pressure on the company beginning in June. According to cryptocurrency news site CoinDesk, OKX, based in the Seychelles, is second in market share at 5.44%, while Coinbase, based in the US, is third at 5.37%.
However, Binance’s position at the top of the cryptocurrency market is now far from guaranteed because it must pay US authorities a record $4.3 billion to settle criminal charges.
On Tuesday, Zhao entered a guilty plea to federal charges of money laundering and resigned as CEO. The settlement was dubbed the largest corporate settlement involving criminal charges against an executive by US officials.
After a lengthy investigation, US authorities claimed that Binance permitted bad actors to operate on the platform, facilitating transactions related to the funding of terrorism, drugs, and child sex abuse.
Furthermore, the Justice Department claims that Binance lacked procedures to flag or report transactions for potential money laundering risks, and that staff members were well aware that this oversight would attract criminals to the platform. Court documents quote a compliance staffer as saying: “We need a banner that says, ‘Is washing drug money too hard these days? Come to Binance, we got cake for you.
Zhao could receive a sentence of up to ten years in prison, though it will probably be much less. In addition, he consented to pay a $150 million civil penalty and a $50 million criminal fine.
Zhao wrote on X, “I made mistakes, and I must take responsibility.” “This is what’s best for me, Binance, and our community. Binance is not a newborn anymore. I should give it the freedom to walk and run now.
What it means for cryptocurrency Binance has been quick to note that it expanded quickly within a wild and mostly unregulated industry, much like its notorious former rival FTX.
The company released a statement on Tuesday, saying, “While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance.” “Binance made poor choices while expanding at a very rapid rate throughout the world. Binance accepts accountability for this previous chapter today.
Given the seriousness of the charges against Binance, the exchange’s ability to continue operating—albeit without CZ as CEO—and CZ’s avoidance of jail time are probably the best outcomes, according to PitchBook cryptocurrency analyst Robert Le. “Binance’s current situation is a result of its early’move fast and break things’ approach, which involved offering products that were illegal or entering markets without the necessary licenses.”
According to Adav, Binance’s $4.3 billion acquisition represents its standing as a systemically important organization that may be too big to fail.
Yadav stated, “Binance is given a chance to live another day as a result of this plea agreement.” “I believe that illustrates a concern that, should Binance go down, that would inflict additional harm on regular people who own money on it as well as the industry overall.”