Time and again, we have been reminded that no one is “too big to fail” in the cryptocurrency space. We have seen — and still feel the aftershocks — caused by the earth-shattering bankruptcy of Sam Bankman-Fried’s FTX. And in a shot of irony, Binance, the exchange helmed by Changpeng “CZ” Zhao that uncovered FTX’s scheme, is now facing its own set of charges under the strong arm of the law.
So, what are the current charges hounding the giant crypto exchange in the US? Here’s a breakdown of the charges that forced Binance to fork out $4.3 billion in settlement.
Anti-Money Laundering Law Violations
Authorities alleged Binance orchestrated billions of dollars in crypto transactions within the US. However, the company failed to implement KYC (know your customer) identity verification checks mandated by the country’s anti-money laundering (AML) laws.
None other than the compliance department of Binance admitted that their current controls are deemed inadequate in preventing criminals from utilizing their platform. Regulators added that there were criminal transactions facilitated by the firm obfuscated by crypto mixers.
One particular instance cited in the complaint was between August 2017 and April 2022 when $106 million worth of Bitcoin went between Binance wallets and Russian darknet marketplace Hydra.
Operating an Unlicensed Business
Although the main body of Binance held no base of operations in the US, the company purportedly attracted a “substantial number of US users.” In its apparent eagerness to “gain market share and profit as quickly as possible,” it failed to register its business with the Financial Crimes Enforcement Network (FinCEN) as a money services business (MSB) while conducting its US operations from August 2017 to October 2022.
Moreover, the lawsuit claimed Binance knowingly “chose not to comply” with regulations as “doing so would limit its ability to attract and maintain US users.”
Failure to Abide Sanction Laws
Court documents revealed Binance processed 1.1 million crypto transactions valued at around $898.6 million from Iran along January 2018 to May 2022. Over 12,500 of its users provided contact numbers local to Iran.
Since 1979, the US imposed a series of sanctions on the Middle Eastern country for its financing of identified terrorist networks, human rights abuses, and its continuing nuclear missile program. In addition to Iran, the crypto exchange served “thousands of users” from other sanctioned countries.
Investigations found notorious terrorist cells, including Hamas, Al Qaeda, the Palestine Islamic Jihad (PIJ), and Islamic State (ISIS) having crypto wallet addresses hosted by Binance.