Changpeng Zhao (CZ), the founder of Binance, has consented to step down and plead guilty to charges of violating US anti-money laundering regulations.

A complete withdrawal from the US market is on the horizon as part of Binance's settlement with the Financial Crimes Enforcement Network (FinCEN).

Will CZ Be Jailed?

Binance, one of the leading cryptocurrency exchanges, is set to pay an unprecedented $4.3 billion in fines, marking a historic financial penalty and one of the largest in the realm of US criminal penalties.

Binance's financial commitment involves a payment of $1.81 million within 15 months and a forfeiture of $2.51 billion, forming part of the agreement with the Justice Department.

CZ himself will bear a personal fine of $50 million and could potentially face up to 18 months in prison under federal sentencing guidelines, with the possibility of a more severe penalty still on the table, according to senior Justice Department officials.

The former Chief Compliance Officer of Binance, Samuel Lim, is also implicated in the settlement.

CZ took to the X (formerly known as Twitter) to share his views.

What Happened?

The Department of Justice reveals that Binance was involved in facilitating transactions exceeding $900 million between US and Iranian users, contravening strict US sanctions against Iran.

Allegations include acceptance of significant sums from illicit sources, such as the dark marketplace Hydra and the now-outlawed crypto mixing platform 'Best Mixer.'

Binance is accused of misleading authorities by allowing high-volume American users to continue transactions on the platform.

CZ today appeared in a Seattle federal court, entered a plea, and was subsequently released on a record $175 million personal recognisance bond.

One part of the plea states:

Defendant Binance has accepted the resignation of Zhao, its CEO, and prohibited him from any present or future involvement in operating or managing Defendant's business. This prohibition begins as of plea acceptance and ends three years from the date a monitor is appointed;

A personal recognisance bond, also known as a PR bond, is a type of bail bond that does not require the defendant to pay any money upfront.

SEE: CZ's bail documents, under CR23-179 RAJ

The court instead issues an order releasing the defendant from custody on the condition that they will appear for all scheduled court appearances.

Only when the defendant fails to uphold their end of the bail by missing court dates, for instance, will that person have to pay the full bail amount.

They may then rearrested in the future.

Following the bail, CZ is allowed to return to Dubai, and has the next hearing is scheduled for February 23, 2024.

Criminal Charges

Binance is faced with three criminal charges, namely, operating an unlicensed money transmitting business, violating the International Emergency Economic Powers Act, and conspiracy charges.

As part of the $4 billion settlement with the Department of Justice and the Commodity Futures Trading Commission (CFTC), Binance anticipates a substantial overhaul.

Richard Teng, Binance's head of regional markets outside the US, has been introduced as CZ's successor.

He has taken to the X to share his thoughts on succeeding the role.

Moving forward, Binance plans to implement governance changes with the introduction of a new board and has committed to submit to a US-based third-party monitor.

This monitor will be appointed on a five-year term to oversee its sanctions compliance program, granting the US Treasury Department access to its records and systems during this period.

Binance.US, being a seperate entity from Binance Global, will be unaffected.

How Did Binance Pay Its Fine?

On November 9, Binance executed a transfer of approximately $3.9 billion USDT between wallets.

Approximately $3.9bn USDT from its Binance-Cold 2wallet on Tron was moved to its Binance 3 hot wallet.

This had marked the 8th biggest all-time USDT transaction on the Tron network,

From Binance 3, $300m in USDT was then sent toBinance-Hot 7, leaving approximately $3.6bn in Binance 3.

While unclear if this is related to the settlement penalty, the exactitude of the amount involved suggests that it might be.

Coinbase's director Connor Grogan took Binance's Proof of Reserves to task, analysing if Binance will be able to settle the fine.

He omitted corporate cryptocurrency assets, revealing a total of $6.35 billion in assets, including $3.19 billion in stablecoins.

He suggests Binance can most likely settle the $4.3 billion fine without selling crypto assets.

Binance's stablecoin balances appear normal as of time of writing.

Market Aftershock

Binance's BNB market value took a hit, down by more than 10% and is currently trading at $229.1, reflecting the repercussions of CZ's guilty plea.

Binance users also appear to be spooked, with close to $1 billion in outflows as of time of writing.

Following this persecution of Binance, there appears to be greater regulatory scrutiny from the US government in relation to cryptocurrency exchanges.

Next On The Chopping Board

While not currently on the CFTC and DOJ's radar, the SEC has charged Kraken, alleging the operation of an unregistered securities exchange, broker, dealer, and clearing agency.

In its claims, it has included specific cryptocurrencies, including Solana (SOL), Cardano (ADA), Polygon (MATIC), Internet Computer (ICP), Cosmos (ATOM), Algorand (ALGO), Sandbox (SAND), Decentraland (MANA), and Chili (CHZ), to be targeted as securities in the lawsuit against Kraken.

The exchange vehemently contests this claim, pledging a robust defense.