WASHINGTON (AP) \u2014 The U.S. government dealt a massive blow to Binance, the world\u2019s largest cryptocurrency exchange, which agreed to pay a roughly $4 billion settlement Tuesday as its founder and CEO Changpeng Zhao pleaded guilty to a felony related to his failure to prevent money laundering on the platform.<\/p>\n\n\n\n
Zhao stepped down as the company\u2019s chief executive and Binance admitted to violations of the Bank Secrecy Act and apparent violations of sanctions programs, including its failure to implement reporting programs for suspicious transactions.<\/p>\n\n\n\n
\u201cUsing new technology to break the law does not make you a disruptor, it makes you a criminal,\u201d said U.S. Attorney General Merrick Garland, who called the settlement one of the largest corporate penalties in the nation\u2019s history.<\/p>\n\n\n\n
As part of the settlement agreement, the U.S. Treasury said Binance will be subject to five years of monitoring and \u201csignificant compliance undertakings, including to ensure Binance\u2019s complete exit from the United States.\u201d Binance is a Cayman Islands limited liability company.<\/p>\n\n\n\n
The cryptocurrency industry has been marred by scandals and market meltdowns.<\/p>\n\n\n\n
Zhao was perhaps best known as the chief rival to Sam Bankman-Fried<\/a>, the 31-year-old founder of the FTX, which was the second-largest crypto exchange before it collapsed last November. Bankman-Fried was convicted earlier this month<\/a> of fraud for stealing at least $10 billion from customers and investors.<\/p>\n\n\n\n Zhao, meanwhile, pleaded guilty in a federal court in Seattle on Tuesday to one count of failure to maintain an effective anti-money-laundering program.<\/p>\n\n\n\n Magistrate Judge Brian A. Tsuchida questioned Zhao to make sure he understood the plea agreement, saying at one point: \u201cYou knew you didn\u2019t have controls in place.\u201d<\/p>\n\n\n\n \u201cYes, your honor,\u201d he replied.<\/p>\n\n\n\n Binance wrote in a statement that it made \u201cmisguided decisions\u201d as it quickly grew to become the world\u2019s biggest crypto exchange, and said the settlement acknowledges its \u201cresponsibility for historical, criminal compliance violations.\u201d<\/p>\n\n\n\n U.S. Treasury Secretary Janet Yellen said Binance processed transitions by illicit actors, \u201csupporting activities from child sexual abuse, to illegal narcotics, to terrorism, across more than 100,000 transactions.\u201d<\/p>\n\n\n\n Binance did not file a single suspicious activity report on those transactions, Yellen said, and the company allowed over 1.5 million virtual currency trades that violated U.S. sanctions \u2014 including ones involving Hamas\u2019 al-Qassam Brigades, al-Qaeda and other criminals.<\/p>\n\n\n\n The judge set Zhao\u2019s sentencing for Feb. 23, however it\u2019s likely to be delayed. He faces a possible guideline sentence range of up to 18 months.<\/p>\n\n\n\n One of his attorneys, Mark Bartlett, noted that Zhao had been aware of the investigation since December 2020, and surrendered willingly even though the United Arab Emirates \u2014 where Zhao lives \u2014 has no extradition treaty with the U.S.<\/p>\n\n\n\n \u201cHe decided to come here and face the consequences,\u201d Bartlett said. \u201cHe\u2019s sitting here. He pled guilty.\u201d<\/p>\n\n\n\n Zhao, who is married and has young children in the UAE, promised he would return to the U.S. for sentencing if allowed to stay there in the meantime.<\/p>\n\n\n\n \u201cI want to take responsibility and close this chapter in my life,\u201d Zhao said. \u201cI want to come back. Otherwise I wouldn\u2019t be here today.\u201d<\/p>\n\n\n\n Zhao previously faced allegations of diverting customer funds, concealing the fact that the company was commingling billions of dollars in investor assets and sending them to a third party that Zhao also owned.<\/p>\n\n\n\n Over the summer, Binance was accused of operating as an unregistered securities exchange and violating a slew of U.S. securities laws in a lawsuit from regulators<\/a>. That case was similar to practices uncovered after the collapse of FTX.<\/p>\n\n\n\n Zhao and Bankman-Fried were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019. However, the relationship between the two deteriorated, culminating in Zhao announcing he was selling all of his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.<\/p>\n\n\n\n At this trial and in later public statements, Bankman-Fried tried cast blame on Binance and Zhao for allegedly orchestrating a run on the bank at FTX.<\/p>\n\n\n\n A jury found Bankman-Fried guilty of wire fraud and several other charges. He is expected to be sentenced in March, where he could face decades in prison.<\/p>\n\n\n\n