Binance Under Scrutiny: Unraveling the Troubles and Implications for the Crypto World

Binance Under Scrutiny: Unraveling the Troubles and Implications for the Crypto World

Changpeng Zhao

There are few figures in crypto who have been bigger over the past few years than Changpeng Zhao – better known as CZ – and the company he founded in 2017, Binance.

Binance is not only the largest crypto exchange in the world, but it is also bigger than its rivals. Until recently, Binance claimed about 60% market share for crypto spot trading. Even as the share has fallen close to 40% since US regulators increased pressure on the company in June, no other exchange has even come close. According to crypto news site CoinDesk, Seychelles-based OKEx is in second place in market share with 5.44% and US exchange Coinbase is in third place with 5.37%.

But Binance’s future at the top of the crypto world is no longer certain as it has to pay a record $4.3 billion to US authorities to settle criminal charges.

Zhao resigned as CEO on Tuesday and pleaded guilty to federal money laundering charges. US authorities have released this list of the biggest company settlements ever, ranging from a criminal portfolio to an executive.

After years of investigation, US authorities said Binance sanctioned bad actors on the platform, enabling gangs linked to pedophilia, narcotics and criminals.

Furthermore, according to the Justice Department, Binance did not have panels to attract or report terrorists for money laundering risks, and employees were well aware that such observers were invited to the platform. According to the court’s instructions, as one employee wrote: “We need a flag saying ‘Tribal money is going to be hard to come by these days – friends at Binance, we’ve got cake for you.’


Zhao faces at most 10 years in prison, although his final sentence will be much less. They also agreed to a criminal penalty of $50 million and a civil penalty of $150 million.

“I made mistakes, and I must take responsibility,” Zhao posted on X. “This is what is best for our community, Binance, and me. Binance is no longer a baby. It is now time for me to let it go and run.”

What does this mean for crypto
Binance, like its notorious former rival FTX, is quick to point out that it has rapidly grown its business in a chaotic, largely unregulated industry.

“While Binance is not perfect, it has striven to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance,” the company said in a statement Tuesday. ” “Binance grew too fast globally… [and] made bad decisions along the way. Today, Binance takes responsibility for this last chapter.”

This is a common practice among crypto companies that find themselves under scrutiny. But federal authorities have made it clear that they will leave no stone unturned when it comes to corporate crime in crypto or elsewhere.

Analysts see the deal as a partial victory for Binance and Zhao.
“The ability for CZ to avoid jail time and continue operating the exchange, even without CZ’s CEO, is the best outcome given the seriousness of the allegations against Binance,” said Robert Ley, crypto analyst at PitchBook. ” “Binance’s early ‘move fast and break things’ approach, which included offering products that were illegal or entering the market without proper licensing, has led to its current predicament.”

Initial market reaction to the Binance news was muted, with Bitcoin slipping just over 1% on Tuesday afternoon – hardly a shock in a notoriously volatile market.

Investors and entrepreneurs in the crypto space just want to see the industry move beyond the early days of idolizing founders.

“The question is really whether or not crypto is really growing in a way that is allowing it to exist beyond its influential founders who are taking care of the brand, taking care of innovation, these The institutions are advocating,” said Yesha Yadav, a law professor at Vanderbilt University and an expert on financial regulation. “This is something that will have to be looked at over the next few months.”

Yadav says the $4.3 billion deal for Binance reflects its status as a systemically important institution – potentially too big to fail.

“This plea deal gives Binance a chance to live another day,” Yadav said. “I think this reflects the concern that if Binance was killed, it would cause more harm to average people who keep money in the industry as a whole.”

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