3 months ago
From being the world’s largest cryptocurrency exchange to being the company that has paid the highest penalty in US history, what CEO do to become guilty?
Let’s understand the full story.
The world's largest cryptocurrency exchange’s CEO Changpeng Zhao found guilty in a long-running case of anti-money laundering activities. Commodity Futures Trading Commission (CTFC) filed civil charges in March against Binance for failing to implement a money laundering programme and preventing severe crimes like terrorism, and child abuse.
If you are looking forward to knowing the full details, you are in the right place!
It all started when CTFC found Binance violating numerous compliance with the Commodity Exchange Act and filed a complaint against the compliance officer of the company Samuel Lim. As per the proposed settlement agreement in the court, Lim has agreed to pay $1.5 million.
In March, the CFTC initiated legal action against Binance, accusing the exchange of lacking an efficient anti-money laundering system to identify and prevent terrorist financing. According to the CFTC, employees working within Binance itself admitted that the platform had been involved in activities that might be considered unlawful.
After this revelation, the investigation has taken a speed which was directed towards CEO Changpeng Zhao. During the investigation, it was found out that Lim was aware of the transactions made by Palestinian militant group Hamas.
In June, Binance alleged by authorities that it allowed US residents to trade without proper registration as a securities exchange and misused customer funds. Despite its origins in China, Binance relocated its operations internationally following a crackdown on the crypto sector by Chinese authorities.
Before heading towards further investigations, let’s know a bit about Changpeng Zhao:
Who is Changpeng Zhao?
Zhao's journey in the financial world began like any other, with experience at companies like Bloomberg, Tradebook and Fusion Systems. But it was in 2013 that he set his sights on the cryptocurrency is progressing acceptance, embarking on a series of projects related to blockchain and digital currencies.
Fast forward to July 2017, and Changpeng Zhao, better known as CZ, founded Binance, a cryptocurrency exchange that would soon capture the attention of the crypto world. Binance stood out for its sleek user interface, extensive range of supported cryptocurrencies, and remarkably low trading fees.
In what felt like the blink of an eye, Binance became the world leader in the world of cryptocurrency. Its innovative features and aggressive expansion tactics attracted users, while under Zhao's guidance, the platform introduced its very own native cryptocurrency – Binance Coin (BNB) – which swiftly made its mark in the crypto market.
How was Zhao alleged in illegal activities?
Yet, amidst all the success and soaring growth, Binance found itself engaged in regulatory violence across multiple countries. It prompted Zhao to adapt while ensuring that the platform complied with the diverse requirements of various jurisdictions.
Then, in a dramatic turn of events, U.S. Attorney General Merrick Garland made a damning statement: "Binance made it easy for criminals to move their stolen funds and illegal proceeds on its exchanges. Binance also did more than just fail to comply with federal law. It pretended to comply."
What activities did Binance alleged to be involved in?
There are three primary types of transactions the company is involved in whose responsibility is taken by the CEO Zhao. These are as follows :
Unauthorized Sanctions :
Binance was accused of deliberately undermining its own sanctions monitoring controls, allowing over 1.5 million virtual currency trades that violated U.S. sanctions. This alleged involvement in sanctions violations raised concerns about the exchange's role in enabling transactions that could have adverse national security implications.
Non-reporting of suspicious activity :
The company is alleged to be the non-reporting of transactions that are clearly suspicious like transactions made by the terror group Hamas even after being aware of the same. It is the responsibility of the company to track the record of all the transactions made by the participants. The company failed to implement the regulatory requirements and violated the act.
A threat to national security :
The illegal activities comfort individuals who can easily become a threat to national security. Due to low-quality internal controls and deliberately allowing bulk transactions that lead to ransomware, it is easy to increase crime in the country. Due to these irresponsible acts, crimes like child abuse, demanding ransom, and terrorism funding are becoming easy to transaction through the platform.
What is the final verdict?
According to the court proceedings and final verdict against the CEO, Zhao has to face 18 months imprisonment with a settlement of $4.3 billion to resolve the long-running investigations. However, the case that was filed by the authorities against Binance in June is not closed yet. The investigations will continue under the Securities Exchange Commission (SEC) in which legal issues are yet to be resolved.
According to the CFTC, the company will file reports against all the transactions and provide information to the authorities so that legal action can be taken against all parties.
Writer at Xeloxo
3 months ago