Bloomberg reveals US government and Binance settlement plan $4 billion fine, CZ faces criminal charges in the US.

Bloomberg uncovers $4 billion fine settlement plan between US government and Binance, criminal charges for CZ in the US

Source: Bloomberg

The US Department of Justice is seeking over $4 billion in fines from Binance Holding (referred to as Binance hereafter) as part of a proposed settlement to a years-long investigation into the world’s largest cryptocurrency exchange.

According to sources familiar with the matter, negotiations between the Department of Justice and Binance include the possibility of criminal charges against its founder, Changpeng Zhao, as a resolution to the investigation into alleged money laundering, bank fraud, and sanctions violations.

Changpeng Zhao, also known as “CZ,” resides in the United Arab Emirates. The country does not have an extradition treaty with the US, but that hasn’t stopped CZ from voluntarily coming to the US.

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Binance has not responded to multiple emails and phone calls seeking comment. The Department of Justice has declined to comment.

According to anonymous sources who requested to remain anonymous due to the sensitive nature of the discussions, the news may be announced as early as the end of this month, but the situation remains uncertain.

Matt Walsh, founding partner of cryptocurrency venture capital firm Castle Island Ventures, said, “A settlement that includes monitoring provisions could be a compromise that would protect investors and allow Binance to choose a more institutionalized and compliant future direction.”

The specific timing, structure, and exact amount of the proposed settlement are unclear. However, Binance may have to pay over $4 billion, which would be one of the largest fines ever in a cryptocurrency criminal case.

The investigation is being led by the money laundering and asset recovery divisions of the Department of Justice, as well as national security agencies and the US Attorney’s Office in Seattle.

The Art of Balancing

Three sources familiar with the matter said the agreement aims to strike a balance that allows Binance to continue operating without risking a collapse that would have negative repercussions for the market and cryptocurrency holders.

Another individual stated that Binance has been seeking to minimize the risk in any settlement, including pushing for a deferred prosecution agreement.

If Binance and the Department of Justice reach an agreement on a deferred prosecution agreement, the Department of Justice would bring criminal charges against the company. However, as long as the company meets specified conditions, the US would not prosecute. These conditions typically include paying a significant fine and agreeing to a detailed statement of the wrongdoing, as well as establishing a process to monitor Binance’s compliance.

One of the sources said that the Department of Justice has been investigating Binance for suspected facilitation of evading US sanctions, as well as transactions involving funding for Hamas.

FTX Case

This case represents one of the largest investigations ever conducted by the Department of Justice into a cryptocurrency company. The settlement would be another historic resolution following FTX’s collapse, which led to its founder, Sam Bankman-Fried, being convicted earlier this month on charges of fraud and conspiracy.

Despite efforts by officials from the Department of Justice to push for widespread changes in Binance’s leadership, it is currently unclear whether other executives besides Changpeng Zhao will face charges in this case.

Binance is facing legal and regulatory actions from other U.S. institutions, as well as stricter scrutiny from U.S. lawmakers.

In June, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit, accusing Binance and Changpeng Zhao of mishandling customer funds, misleading investors and regulators, and violating securities rules.

Binance U.S.

The lawsuit has effectively weakened Binance U.S. (Binance.US). Brian Shroder, the CEO of Binance.US, left the company in September, at a time when the struggling cryptocurrency platform was undergoing another round of layoffs. The company laid off about a third of its workforce, more than 100 positions. After losing banking support and suspending USD deposits, the trading volume on the exchange has slowed to a crawl.

The U.S. Commodity Futures Trading Commission (CFTC) claimed in March that as Binance grew to become the world’s largest digital asset trading platform, Binance and Changpeng Zhao frequently violated U.S. derivatives rules. The CFTC stated at the time that Binance should have registered with the agency years ago, but continued to violate CFTC regulations.

Binance has disputed these lawsuits and stated that it is actively cooperating with regulatory investigations and is disappointed with the enforcement actions. In a statement in March, Changpeng Zhao said the CFTC’s complaint “seems to contain incomplete factual statements” and that Binance disagrees with the description of many of the issues. Binance referred to the documents from the U.S. Securities and Exchange Commission as the agency’s attempt to “regulate with blunt enforcement and litigation warheads, rather than the thoughtful, nuanced approach that this dynamic and complex technology deserves.”

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