Founder of Binance crypto exchange admits failing to prevent money laundering

22 November 2023, 11:34

Changpeng Zhao
Crypto SEC Binance. Picture: PA

Chief executive Changpeng Zhao pleaded guilty to one count of failure to maintain an effective anti-money-laundering programme.

The founder of Binance, the world’s largest cryptocurrency exchange, has admitted he failed to take steps to prevent money laundering as the company agreed to pay more than 4 billion dollars (£3.2 billion) after an investigation by the US government.

Chief executive Changpeng Zhao pleaded guilty to one count of failure to maintain an effective anti-money-laundering programme in a federal court in Seattle. Binance is a Cayman Islands limited liability company.

The plea came as the company agreed to pay more than 4 billion dollars as part of an agreement with the US government, a source said.

The charge was similar to practices uncovered after the collapse of the second largest cryptocurrency exchange, FTX, last year.

Sam Bankman-Fried
Sam Bankman-Fried, founder of failed cryptocurrency brokerage FTX (Bebeto Matthews/AP)

The judge set Zhao’s sentencing for February 23 although that is likely to be delayed as both sides agreed there would be no sentencing for at least six months.

Zhao had previously faced allegations of diverting customer funds, concealing the fact that the company was sending billions of dollars in investor assets to a third party that he also owned.

It comes months after the company was accused of operating as an unregistered securities exchange and violating a series of US securities laws in a lawsuit from regulators.

The cryptocurrency industry has been marred by scandals and market meltdowns. Sam Bankman-Fried, the 31-year-old founder of failed cryptocurrency brokerage FTX, was convicted earlier this month of fraud for stealing at least 10 billion dollars (£8 billion) from customers and investors.

Zhao was best known as the chief rival to Bankman-Fried.

The pair were originally friendly competitors in the industry, with Binance investing in FTX when Bankman-Fried launched the exchange in 2019, but the relationship deteriorated, culminating in Zhao announcing he was selling all his cryptocurrency investments in FTX in early November 2022. FTX filed for bankruptcy a week later.

At this trial and in later public statements, Bankman-Fried tried to cast blame on Binance and Zhao for allegedly orchestrating a run on the bank at FTX.

A jury found Bankman-Fried guilty of wire fraud and several other charge in October. He is expected to be sentenced in March and could face decades in prison.

By Press Association

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