The DOJ reached a “historic” settlement with the world’s largest exchange Binance. Binance settlement is for the stated crimes that are sweeping, and the penalty is massive. Binance will pay a $4.3B fine for violating money transmission laws and U.S. sanctions, and its CEO, Changpeng “CZ” Zhao, who founded the firm in 2017 and built it into a behemoth, was forced to resign.
When the U.S. government announced criminal charges against Binance on Tuesday, it marked the successful culmination of a yearslong campaign to bring the crypto world’s biggest, and wildest, company to heel. The significance of the Binance 4B settlement was reflected by the attorney general and the secretary of the Treasury holding a joint news conference to share the details.
How much is Binance settlement?
Binance would pay $4.3 billion in penalties among the largest fines in corporate history and that CEO Changpeng Zhao would step down and pay $50 million as part of a three-count indictment for money laundering.
The Binance 4B settlement, accompanied by legal settlements with three different federal agencies, also underscored a dramatic change of fortune for both Binance and Zhao from two years ago. On Tuesday, that freewheeling era came to an end when Binance CEO, the soft-spoken Zhao appeared in federal court in Seattle to bow to U.S. authorities and agreed to the Binance 4B settlement.
Big win for Justice department
Tuesday’s developments mark a big win for the Justice Department, but, paradoxically, they’re also a victory for Binance. Unlike FTX and other fallen crypto titans, Binance will continue to operate and, by all appearances, its former CEO will remain a free man.
This outcome defies the predictions of many who assumed that Binance’s many transgressions—which include turning a blind eye to transactions with rogue regimes like Iran and Russia—would spell its doom. While the massive penalty is a blow to the company’s treasury and the humbling of Zhao undercuts Binance’s longtime edge, the early market response suggests the company will survive.
Will Binance survive the 4B settlement?
Many in the industry have long fretted that the money laundering criminal charges looming over Binance were a potential black swan event. But so far, the market has largely shrugged off the day’s dramatic events. Bitcoin was down around 4% over 24 hours after the news of Binance settlement, to just under $36,100, while Binance’s native BNB token had fallen 12% a significant amount but hardly earthshaking in the volatile crypto markets.
For now, all indications are that Binance will weather the current storm and be poised to ride a months-long upswing in digital assets markets, which many say will mark the end to an 18-month-long Crypto Winter. If prices largely hold up over the next 48 hours, it’s a good sign that there will be smooth sailing for the foreseeable future—especially as traditional financial giants like BlackRock and Fidelity prepare to enter the market with crypto ETFs in the coming weeks.
In the longer term, however, Binance must navigate a new legal obligation that has the potential to hobble its status as an industry leader.
Corporate culture shock for Binance
While Binance settlement announcements delivered major punishments to both Binance and Zhao, the long-term pain for the company lies in the court-appointed monitors described in settlements from both the Justice Department and the Treasury Department‘s Financial Crimes Enforcement Network division.
Under the terms of the settlement, the monitors will be appointed for three- and five-year terms and enjoy sweeping powers to oversee Binance’s business practices, including how it adds new customers and how it interacts with a range of jurisdictions subject to U.S. sanctions or surveillance.
The monitors are likely to be a major shock to the corporate culture of Binance, which has for so long been so cavalier that the company professed to have no corporate headquarters.
A person close to Binance, who spoke on the condition of anonymity, downplayed such concerns, saying that the settlement marks the start of a new era in crypto that will be marked by compliance—and that Binance’s pact with U.S. regulators puts the firm in position to be a primary beneficiary.
Binance’s reinvention
It is indeed possible that Binance will be able to reinvent itself as a model corporate citizen of the crypto world, and emerge as a favored forum for mainstream investors. But this is likely to be an uphill fight as the company tries to find its way without its founder and longtime CEO—and as it tries to operate with an agent of the U.S. government looking over its shoulder at every turn.
