In the past 24 hours, more than $1 billion has left Binance, not including bitcoin, according to blockchain analysis firm Nansen. The U.S. government has charged Zhao and others with breaking the Bank Secrecy Act for not having an efficient anti-money-laundering program and deliberately disobeying U.S. economic sanctions. Consequently, Binance has accepted to surrender $2.5 billion and pay a fine of $1.8 billion in total, making it “one of the largest penalties we have ever obtained”, as U.S. Attorney General Merrick Garland commented.
More than $1 billion has been withdrawn from Binance in the last 24 hours, excluding Bitcoin, according to blockchain analysis firm Nansen, as CEO Changpeng Zhao and the company reached a deal with the Department of Justice and agreed to pay a fine of $4.3 billion. Previous securities violations by the exchange were also addressed. BNB, Binance's native token, has dropped by over 8% in the last day.Despite the decline in withdrawals, Nansen notes that there remains more than $65 billion of assets on the platform, meaning that Binance still has ample capital. Grzegorz Drozdz of Conotoxia Ltd commented that while some assets have been affected, there has been no mass exodus of funds."Bitcoin has seen a fall of 1.3%, but 98 out of the top 100 cryptocurrencies have seen a rebound," Drozdz stated. He additionally predicted that the resolution of the dispute with regulators combined with the likely approval of a Bitcoin ETF could provide a favorable long-term outlook for the crypto market.
The multi-billion dollar question looming for the cryptocurrency giant Binance is how its CEO and founder Changpeng Zhao, who has agreed to a plea deal and stepped down from the company, will fare in the U.S. on the heels of his alleged crimes tied to running the exchange. Founded in 2017, Binance went from being a little-known entity to an influential force in virtually no time at all.
Experts interviewed by CNBC believe that Binance stands to emerge from this tough situation relatively unscathed, citing the company's efforts to comply with the DOJ process, implement a three-year plan to meet compliance standards, and a substantial amount of assets held in reserve. Yesha Yadav, Milton R. Underwood professor of law and associate dean at Vanderbilt University, commented that despite the hefty $4 billion fine, Binance is not facing a life-threatening amount of debt. She pointed out that the company's long-standing authority within the crypto-space, CZ's personal wealth, and steady trading activity in spite of sluggish crypto volume and a decrease in Binance's market share, lead her to conclude that this fine will not threaten Binance's solvency.
Zhao and others faced charges for disregarding the Bank Secrecy Act by failing to institute an effective anti-money laundering system, and for knowingly disregarding U.S. economic sanctions "in a premeditated and calculated effort to benefit from the U.S. market without executing the safeguards needed by U.S. law," reported the Justice Department. In response to the accusations, Binance is to relinquish $2.5 billion to the government, and to pay a penalty of $1.8 billion, making the total amount to be repaid by the company $4.3 billion. At a press conference Tuesday, U.S. Attorney General Merrick Garland stressed that "using modernized mechanisms to break the law will not render you an innovator. It makes you a criminal." Zhao then declared on X - previously known as Twitter - that he had "made mistakes" and "must accept responsibility." Subsequently, Richard Teng, former Abu Dhabi financial services regulator, took over from Zhao, where Teng was previously functioning as global head of regional markets at Binance and director of corporate finance at the Monetary Authority of Singapore. This action against Binance and its founder was a collective effort between the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department, with the Securities and Exchange Commission notably absent. Treasury Secretary Janet Yellen said in a statement Tuesday that the exchange facilitated over 100,000 transactions which involved terrorist organizations and drug dealing, as well as in excess of 1.5 million digital currency trades which violated U.S. sanctions. It also allowed certain transactions to be undertaken on behalf of militant groups like Hamas' Al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaida, and ISIS, Yellen added, while pointing out that Binance "failed to file a single suspicious activity report." Zhao was released on a $175 million personal recognizance bond, backed up by $15 million in cash, and has a sentencing hearing planned for February 23rd.
Binance will remain operational, although it must adhere to new regulations. These regulations include upholding U.S. anti-money laundering policies and appointing an independent compliance monitor. The criminal charges brought against Binance, which were publicized on Tuesday, include operating an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy. Its competitors, Coinbase, Kraken, and OKX may take advantage from the situation as Coinbase and Kraken are facing lawsuits from the SEC. The latter alleges Coinbase of being an unapproved securities exchange whereas the former is accused of commingling more than $33 billion of its clients' crypto assets with its own.
Vanderbilt University's Yadav believes Binance's reserves will be scrutinized as investors search for new companies to invest in after the CEO's exit. Binance made an effort to become transparent following the FTX collapse, but the "proofs of reserves" they issued are based on minimal data obtainable from public blockchains, and not at the same level as a full audit. Yadav comments that the state of Binance's reserves in the following months and years will be under much speculation. Questions originating from this include the way the company is organized, its internal governance and risk management. Yadav also states this has caused the CFTC to investigate Binance's interconnections as a possible way to breach their regulations.
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