Why Binance founder confessed to money laundering – 11/23/2023 – Market

Changpeng Zhao became famous at the end of 2022, when one of the biggest scandals in the world of cryptocurrencies broke out.

The founder of Binance, the world’s largest digital currency platform, announced that he was considering buying his rival FTX, which was collapsing.

Zhao soon changed his mind and let his competitor bleed, dragging the rest of cryptocurrencies into a precipitous decline.

Finally, FTX went bankrupt and its founder, Sam Bankman-Fried, was prosecuted and convicted by the US judicial system for fraud and money laundering.

This is how, after the collapse of FTX, Zhao became the new “king of cryptocurrencies”. But not for long.

On Tuesday (21), Zhao announced his resignation as CEO of Binance, after pleading guilty to money laundering.

“I made mistakes and I must take responsibility. This is what is best for our community, for Binance and for me,” he said in a message published on X.

The Department of Justice announced that it required Binance to pay US$4.3 billion (R$16.6 billion) in fines and forfeitures and to help users around the world evade Washington’s sanctions.

“Binance has enabled nearly $900 million in transactions between users in the United States and Iran and has facilitated millions of dollars in transactions between US users and users in Syria and the Russian-occupied Ukrainian regions of Crimea, Donetsk and Luhansk,” a spokesman said.

The Justice Department also said the platform made it easier for criminals and terrorists to move money.

“Between August 2017 and April 2022, there were direct transfers of approximately US$106 million (R$520 million) in bitcoins to Hydra’s Binance.com wallets.

Hydra was a Russian darkweb marketplace, frequently used by criminals, that facilitated the sale of illegal goods and services,” the department said.

Binance must now report suspicious activity to federal authorities.

“This will boost our criminal investigations into malicious cyber activity and terrorist fundraising, including the use of cryptocurrency exchanges to support groups like Hamas,” the Justice Department added.

Binance and Zhao have been under the radar of authorities since 2018, but it was only in June of this year that American authorities brought the first charges against them.

Richard Teng, head of regional markets at Binance, has been named the new chief executive.

In a post on X, Zhao said it was “not easy to emotionally separate” from the company.

And, as part of the agreement with the authorities, he will have to pay a fine of US$50 million (R$245 million) and will be prevented from having any type of participation in the business.

But how did Zhao become one of the most influential figures in the world of cryptocurrencies?

‘My mother and I left China’

Known in the industry as Changpeng “CZ” Zhao, the businessman was born in China’s Jiangsu Province in 1977.

The son of teacher parents, Zhao recounted in a Binance blog post the problems his family faced in China in the 1980s and how he fled the country at the age of 12, after the Tiananmen Square massacre.

“On August 6, 1989, my mother and I left China and migrated thousands of kilometers to Canada. For those who know Chinese history, this is two months after the events of June 4, 1989,” Zhao wrote.

“I remember the line outside the Canadian embassy lasted three days,” he commented on the blog. “It changed my life forever and opened up endless possibilities for me.”

Zhao spent his teenage years in Vancouver, where he worked various jobs, including at McDonald’s, selling hamburgers.

He later studied computer science at McGill University in Montreal and then interned at the Tokyo Stock Exchange before working for Bloomberg Tradebook in New York.

A few years later, Zhao returned to China to work at several technology companies and in 2017 founded Binance.

However, the Chinese government banned the operation of cryptocurrency platforms in the country and Zhao migrated again, consolidating his business in other latitudes.

Binance entered the big leagues and quickly became the largest cryptocurrency buying and selling platform in the world.

‘An extensive network of deception’

However, problems along the way soon appeared. British authorities banned Binance’s operations in 2022, while in the United States the first legal investigation was opened against the broker for alleged illegal operations in the country.

In March, American regulators attempted to ban Binance, claiming the company operated illegally in the country.

The Commodity Futures Trading Commission (CFTC) lawsuit claims the company did business in the United States without properly registering with authorities.

It accused Binance of violating numerous US financial laws, including rules aimed at preventing money laundering.

At the time, Binance defended its practices.

It said it had made “significant investments” to ensure that US users were not active on the platform, including blocking those identified as US citizens or residents, or who had a US mobile phone number.

Then came the lawsuit last June, when the company was accused of forming an “extensive network of deception” by the Securities and Exchange Commission. The agency said the trading platform and Zhao, its founder, ignored rules designed to protect investors to continue operating in the United States.

At the time, Binance said it would defend itself “vigorously.” This defense ended this Tuesday with Zhao’s acceptance of guilt.

This text was originally published here.