Legend: Became the richest man in China in just 4 years

Binance is a limited liability company registered in the Cayman Islands in July 2017 by Canadian-Chinese Zhao Changpeng. In less than eight months, Binance has rapidly emerged as the world’s largest cryptocurrency exchange. Changpeng Zhao's success also led to him being listed as the "richest man in cryptocurrency" by Forbes Magazine in May 2018, with a net worth of more than US$1.39 billion. By December 2021, Zhao Changpeng's wealth has soared to more than 90 billion US dollars, surpassing Nongfu Spring Chairman Zhong Suisui, becoming the richest Chinese and entering the top 10 richest people in the world.

However, Binance quickly became the focus of U.S. regulatory authorities due to the ease with which cryptocurrencies can escape regulation during transactions. According to the indictment, the Department of Justice has been paying attention to Binance since at least 2018, when Binance was in the process of rapid development.

In December 2020, federal prosecutors asked Binance to provide internal records related to anti-money laundering and communications dating back to 2017 regarding its CEO Changpeng Zhao. This shows the concerns of U.S. regulators about Binance’s anti-money laundering aspects, which also paved the way for subsequent legal disputes.

Allegation: Cryptocurrency becomes platform for money laundering

Binance faces accusations from the Justice Department that it refused to cooperate with regulators, chose not to implement anti-money laundering measures, and effectively became a clearing house for all kinds of illegal financial transactions. According to allegations in court documents, from 2018 to 2022, Iran conducted nearly $9 billion in financial transactions on Binance, making U.S. sanctions against Iran ineffective. In addition, another terrorist organization, Hamas, also used Binance for transactions.

In March of this year, the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its CEO Changpeng Zhao, alleging violations of eight core provisions of the Commodity Exchange Act and other CFTC regulations, including requiring the implementation of "aim to Preventing Money Laundering and Terrorist Financing”.

In June this year, the U.S. Securities and Exchange Commission (SEC) filed 13 charges against Binance and Changpeng Zhao, mainly involving issues such as exaggerating trading volumes, fund transfers, failing to restrict U.S. customers from using its platform, and misleading investors in terms of market supervision. This series of legal disputes has had a negative impact on Binance’s reputation and business.

Hard shoulder: Call for unity to formulate industry rules

In addition to the accusations against Binance itself, Changpeng Zhao also faces accusations of misappropriating customer funds and concealing the transfer of billions of dollars in investor assets to offshore companies under his name.

Binance responded strongly to the SEC's investigation and published a long article saying that the SEC's accusations were baseless and were unilaterally defining the cryptocurrency market structure. Binance believes that the SEC’s actions appear to be an attempt to seize jurisdiction from other regulatory agencies.

Against this background, Changpeng Zhao called on the cryptocurrency industry to unite and formulate its own rules. Justin Sun, the founder of TRON, also published an article in support of Changpeng Zhao, expressing his belief that justice will eventually be upheld and that everyone will face this challenge together.

Lessons from the Past: The Consequences of Carrying It Hard​

At the federal court in Seattle, USA, Binance CEO Changpeng Zhao arrived on November 21. Under a comprehensive agreement with the U.S. Department of Justice, Changpeng Zhao will plead guilty to money laundering charges and agree to pay a $50 million fine. The agreement also comes as part of a settlement with the U.S. Treasury Department and the Commodity Futures Trading Commission, with Changpeng Zhao agreeing to step down as CEO. This major change could have far-reaching consequences for Binance and its future operations.

According to an official statement from the U.S. Department of Justice, Binance Holdings Limited has admitted to participating in suspected money laundering, unlicensed remittances and sanctions violations and agreed to pay a $4.3 billion fine. This announcement further highlights the regulatory focus on cryptocurrency exchanges and has a significant impact on Binance’s operations and reputation. Despite this, Binance emphasized that the company’s former CEO Changpeng Zhao is still Binance’s major shareholder, implying that he still holds certain rights and status in the company. This situation may have a profound impact on the future of the cryptocurrency industry and Binance’s operating strategy.

In comparison, the outcome of Binance and Changpeng Zhao's choice to plead guilty and be punished is still better. Just two weeks ago, Sam Bankman-Fried, the co-founder of another cryptocurrency exchange, FTX, refused to plead guilty and went to a jury trial, and was ultimately found guilty of two counts of wire transfer. He faces decades in prison for fraud, four counts of conspiracy to defraud and one count of conspiracy to defraud, as well as money laundering.

It is worth mentioning that Zhao Changpeng is also an original investor in FTX. Bankman-Fried's sentencing will take place on March 28. It is not clear whether the harsh sentence of Bankman-Fried was the main reason for Zhao Changpeng to plead guilty, but it will at least have an impact on him.

What’s the future for Binance?

Binance Coin fell nearly 6% after the news was announced. The price of Bitcoin fell nearly 2% in 24 hours and was located at $36,800.

According to media reports on the 22nd, Changpeng Zhao announced his resignation as Binance CEO, saying that his current resignation was the right decision and he would take responsibility for the mistakes he made. Richard Teng, a long-time Binance executive, will succeed Changpeng Zhao as Binance’s new CEO. Changpeng Zhao also emphasized the safety of funds and stated that the settlement agreement reached with the U.S. Department of Justice did not involve fund misappropriation or market manipulation. The move marks a significant change in Binance’s leadership and sets a new direction for the company’s future operations and compliance measures.

Binance’s new CEO Richard Teng said that his goal is to ensure that Binance’s users feel reassured about their finances, safety and security. He said Binance is stronger than ever and will focus on working with regulators. Teng said he hopes to work with partners to drive the company's growth and actively adopt innovative technologies such as Web3. This shows that Binance, under the leadership of new leadership, will be committed to strengthening compliance, improving user trust, and actively exploring the application of emerging technologies.