Not a few weeks after FTX founder Sam Bankman-Fried was found guilty of fraud and conspiracy, there is a new criminal trial in the crypto community, but with the founder of another exchange, Binance.
Changpeng Zhao’s resignation and the head of Binance
On November 21, the head of the exchange Changpeng Zhao wrote in his X account that he is leaving the position of CEO of the company, which he held since its founding in 2017. Richard Teng, who was previously responsible for all regional markets outside the United States, was appointed as the new head of Binance.
Legal accusations and the deal with the U.S. Department of Justice
The resignation of the former head of the exchange came as part of a deal aimed at settling allegations by US authorities against Binance. There were three criminal charges against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy.
Attorney General Merrick Garland and Treasury Secretary Janet Yellen told reporters that Binance knew and actively solicited business from sanctioned countries, terrorist groups and online venues used by cybercriminals.
“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen.
«For example, between August 2017 and April 2022, there were direct transfers of approximately $106 million in bitcoin to Binance.com wallets from Hydra. Hydra was a popular Russian darknet marketplace, frequently utilized by criminals, that facilitated the sale of illegal goods and services.) — stated Garland, noting that the platform only stopped processing transfers after Hydra was shut down by German and US authorities last April.
The former head of the Exchange will pay a $50 million fine and resign as CEO. He will retain a controlling stake in the exchange, but he is prohibited from holding management positions in the company and making public statements on its behalf. At the same time, the investigation against him is ongoing, and he may receive up to 10 years in prison, although experts believe that the term will not exceed 18 months, noted Bloomberg.
So far, Changpeng Zhao, pleaded guilty to money laundering violations, founder and former head of the largest cryptocurrency exchange Binance, has been released on $175 million bail, secured by depositing $15 million into a special account and two personal sureties.
To date, Changpeng Zhao is out on bail, and according to the November 27th ruling, he must remain in the country until his February sentencing, even though he was initially allowed to leave the U.S. territory and return to the UAE.
How the market reacted
News of Changpeng Zhao’s resignation and the US Department of Justice’s (the DOJ) claims against the largest crypto exchange triggered a general correction in the crypto market. Bitcoin experienced a decline in its value, falling below $37,000 on Nov. 21. Despite the brief correction, the first cryptocurrency made a comeback as part of the uptrend of the past four weeks, reaching its highest values since 2022 on Friday, November 24. At the time of writing, on November 28, bitcoin was trading at $36,973.
Other coins from the top 10 by capitalization also initially fell in price by 2-4%, but then recovered in value. The Binance native token (BNB) reacted with a drop of almost 10% in the last hour after a brief rally. On November 28, at the time of writing, all coins in the top 10 are showing negative weekly growth.
Against the backdrop of the problems of the largest crypto exchange, the token of the bankrupt FTX exchange (FTT) showed a major growth (+16% per day). Investors are probably waiting for the site’s restart, which has been repeatedly talked about by business representatives and regulators in the United States. As Santiment notes, some traders are swapping their BNB for FTT. On Nov. 27, the price of FTT was $3.50, with a weekly gain of 6.60%.
According to data aggregator DefiLlama, inflows on the Binance exchange have decreased by more than $1 billion in the last 24 hours following the news. At the time of writing, outflows for the week totaled $1.729 billion.
Reaction of experts
Analysts at Matrixport, a provider for digital assets, have concluded that Binance will remain among the largest crypto exchanges in the next two to three years. Company representatives also did not rule out that there will be further pressure on the organization not to exceed 6,000 employees.
According to Matrixport, more exchanges will soon strengthen their compliance programs and become part of a joint surveillance agreement that will play an important role in the approval of a spot bitcoin-ETF in the US.
Director of Coinbase Conor Grogan posted the news on his X-account that Binance will be able to pay a $4.3 billion fine without resorting to selling its own crypto assets. According to the Proof of Reserves report, the exchange holds $6.35 billion in assets, of which $3.19 billion are stablecoins. Moreover, it may have assets not included in the report.
Investment research firm Bernstein also believes that Binance has enough equity to pay the $4.3 billion fine. “In our view, settling the charges by the authorities is the last step before approving a bitcoin-ETF,” the report said.
The company’s analysts also said that Binance will retain its position in the international market, and the settlement with the Justice Department is the last step before the approval of the bitcoin-ETF. According to the company’s analysts, Binance will remain the main trading platform for users outside the United States, but competition from Coinbase and newly regulated exchanges from Hong Kong and Singapore will increase.
What happened with Binance CEO Changpeng Zhao?
Changpeng Zhao, founder of Binance, has pleaded guilty to money laundering charges and resigned as CEO.
What was Binance accused of?
There were three criminal charges against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy.