Today's news is a culmination of the build-up dating back to FTX's implosion last year and the criminal conviction of SBF this year.
Below you can download all the complaints against Binance starting with CFTC's complaint back in March 2023 up to today's OFAC enforcement and CZ's guilty plea.
- Binance CEO’s guilty plea: Changpeng Zhao, the CEO of Binance, the world’s largest cryptocurrency exchange, pleaded guilty to US money laundering charges and agreed to pay over USD 4 billion in penalties. He also resigned from his position as CEO.
- Binance’s violations: Binance was accused of failing to maintain an effective anti-money laundering program, allowing money to flow to terrorists, cybercriminals and child abusers through its platform. Binance also violated US sanctions by matching trades between US users and those in restricted countries like Iran and North Korea.
- Binance’s settlement: Binance reached a plea deal with the US Department of Justice, the Treasury Department, and other agencies. Binance will pay a civil money penalty of USD 3.4 billion, a USD 968 million penalty involving OFAC, and a USD 50 million fine. Binance will also be subject to a five-year monitorship and must report suspicious transactions to authorities.
- DOJ charges Binance: The US Department of Justice has revealed criminal charges against Binance, the world's largest cryptocurrency exchange, and its CEO Changpeng Zhao, for allegedly enabling the laundering of billions of dollars of dirty money across the globe, from Cuba to Iran to Russia.
- Binance's settlement: Binance has agreed to pay a $4.3 billion fine as part of a settlement with the DOJ. Zhao has pleaded guilty to a felony money-laundering violation and has stepped down from his role running the company. He has also agreed to pay a $150 million fine. Former chief compliance officer Samuel Lim must pay $1.5 million as part of the settlement.
- Binance's violations: The indictment against Binance accuses the company of violating US anti-money-laundering laws, including allowing more than 1.1 million transactions between US persons and Iranians, totaling to a value of nearly $900 million. It also alleges $106 million in direct flows of money from the Russian dark-web market Hydra, which offered narcotics, stolen data, and money-laundering services, to Binance accounts. The indictment also alleges that Binance users included ransomware gangs, hackers, scammers, and terrorist groups.
- Binance's culture: The indictment alleges that Binance had virtually no know-your-customer requirements for users in violation of US money-laundering laws, despite offering its services to US users. It also alleges that Binance often ignored sanctions violations or knowingly allowed users to circumvent its money-laundering checks. Zhao is accused of encouraging the company to operate in a "grey zone," telling employees that it was "better to ask forgiveness than permission."
- Charges against Binance: The SEC has filed a complaint against Binance, the largest crypto asset trading platform in the world, and its founder, Changpeng Zhao, for violating various securities laws. The SEC alleges that Binance operated unregistered exchanges, brokers, dealers, and clearing agencies, and offered and sold unregistered crypto assets, including its own tokens, BNB and BUSD.
- Deception and evasion: The SEC accuses Binance and Zhao of engaging in a web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. The SEC claims that Binance and Zhao secretly allowed U.S. customers to trade on Binance.com, while publicly claiming that they were restricted. The SEC also claims that Binance and Zhao secretly controlled Binance.US, while publicly claiming that it was a separate and independent platform.
- Manipulation and commingling: The SEC alleges that Binance and Zhao manipulated the trading volume on Binance.US through wash trading by an undisclosed market maker, Sigma Chain, which is also owned by Zhao. The SEC also alleges that Binance and Zhao commingled and diverted customer assets as they pleased, including to an entity called Merit Peak, which is also owned by Zhao.
From the press release of the Commodity Futures Trading Commission (CFTC) announcing that it has filed a lawsuit against Binance, a digital asset trading platform, and its owner and former chief compliance officer for violating U.S. laws and regulations:
- Binance's alleged violations: The CFTC accuses Binance of offering and executing commodity derivatives transactions to and for U.S. persons without registering with the CFTC or complying with its rules. The CFTC also alleges that Binance acted as a designated contract market or swap execution facility without registration.
- Binance's alleged evasion of compliance: The CFTC claims that Binance deliberately chose to ignore and circumvent U.S. law and instructed its employees and customers to do the same. The CFTC says that Binance did not collect identity-verifying information from its customers, failed to prevent and detect money laundering and terrorist financing, and used communication methods that automatically deleted evidence of their misconduct.
- CFTC's enforcement action: The CFTC seeks to impose disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against Binance and its affiliates. The CFTC also charges the owner and the former chief compliance officer of Binance with control, aiding and abetting, and willful evasion of the CEA and CFTC regulations.
- CFTC's statement: The CFTC Chairman and the Enforcement Division Principal Deputy Director and Chief Counsel express their determination to protect American investors and the integrity of the digital asset market. They warn that the CFTC will not tolerate willful avoidance of U.S. law and will pursue those who flout and attempt to evade CFTC regulatory requirements.
Bonus files: SEC Complaints against Kraken this month and Sam Bankman-Fried last December.
- SEC charges Kraken: The SEC accuses Kraken of operating an unregistered securities exchange, broker, dealer, and clearing agency for crypto assets. The SEC seeks injunctive relief, disgorgement, and penalties.
- Kraken's alleged violations: The SEC alleges that Kraken has made hundreds of millions of dollars unlawfully facilitating the buying and selling of crypto asset securities since September 2018. Kraken has not registered any of its functions with the SEC as required by law, depriving investors of significant protections.
- Kraken's business practices and risks: The SEC also alleges that Kraken commingles its customers' money and crypto assets with its own, creating a significant risk of loss for its customers. Kraken also has deficient internal controls and poor recordkeeping practices, according to the SEC⁴[4].
- Kraken's previous settlement: In February 2023, Kraken agreed to cease offering or selling securities through crypto asset staking services or programs and pay a civil penalty of $30 million.
- SEC charges FTX CEO: The Securities and Exchange Commission (SEC) has filed a complaint against Samuel Bankman-Fried, the CEO and co-founder of FTX, a crypto trading platform. The SEC accuses him of fraudulently raising billions of dollars from investors and misusing customer funds.
- FTX's alleged scheme: The SEC alleges that Bankman-Fried diverted FTX customers' funds to his private hedge fund, Alameda Research, and gave Alameda special treatment on the FTX platform, such as unlimited credit and exemption from risk measures. The SEC also alleges that Bankman-Fried exposed FTX to overvalued and illiquid assets, such as FTX-affiliated tokens.
- FTX's false claims: The SEC alleges that Bankman-Fried lied to investors about FTX's safety, responsibility, and controls. He claimed that FTX had a sophisticated risk engine, adhered to investor protection principles, and followed detailed terms of service. The SEC says that these claims were fraudulent and deceptive.
- FTX's consequences: The SEC seeks injunctions, disgorgement, civil penalties, and an officer and director bar against Bankman-Fried. The SEC also says that its investigation into FTX and other entities and individuals is ongoing. The U.S. Attorney's Office and the Commodity Futures Trading Commission have also announced charges against Bankman-Fried.