The US Justice Department is reportedly seeking over $4 billion from cryptocurrency exchange Binance Holdings Ltd. as part of a settlement for a criminal case involving allegations of laundering ransomware proceeds, bank fraud, and sanction violations, according to a Bloomberg report. The founder of Binance, Changpeng Zhao, commonly known as "CZ," could potentially face charges as part of the probe. This development comes as the cryptocurrency industry faces increased scrutiny following high-profile incidents of fraud and regulatory evasion.
The Justice Department's investigations encompass allegations that Binance evaded sanctions against Iran and Russia and maintained financial ties to Hamas. These inquiries follow the conviction of FTX's founder for fraud, casting a shadow over the cryptocurrency sector. The legal challenges for Binance are not limited to the DOJ; the Securities and Exchange Commission (SEC) has also filed a lawsuit accusing the exchange and Zhao of mismanaging customer funds and committing securities violations in June 2023. Earlier in the year, in March 2023, the Commodity Futures Trading Commission (CFTC) charged Binance with continuous derivatives regulation breaches.
In response to these legal pressures, there is mounting speculation that Binance may need to undergo leadership changes. The company's US arm has already experienced significant workforce reductions after losing essential banking support, leading to a suspension of USD deposits and withdrawals due to severed banking relationships.
The DOJ is considering a deferred prosecution agreement as a potential resolution, which would require Binance to admit wrongdoing and pay substantial fines while undergoing compliance monitoring. This approach aims to allow the exchange to continue operating without causing disruption in the market. A decision on this matter could be reached by late November.
Additionally, a settlement could enforce penalties and stricter Know Your Customer (KYC) protocols on Binance to deter cybercriminals from using the platform for illegal fund transfers. This information comes from an IRS and CFTC's three-year inquiry into Binance's anti-money laundering practices which concluded today.
Changpeng Zhao's background includes a period at Bloomberg from 2002-2005 before founding Binance, which has since grown into one of the world's largest cryptocurrency exchanges by trading volume. As the situation unfolds, all eyes will be on how Binance navigates these complex legal challenges and what impact it will have on its future operations. Despite being at risk of U.S. criminal charges, CZ is based in the UAE where no extradition treaty with the U.S. exists.
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