The world’s largest crypto exchange Binance has agreed to pay a fine of USD 4.3 billion to settle lawsuits in the US out of court. CEO Changpeng Zhao (CZ) resigned from his position with immediate effect.
A special day for the crypto industry: Binance, the world’s largest exchange for trading Bitcoin and Co., is losing its founder and CEO Changpeng Zhao, better known as CZ. The 46-year-old’s resignation is part of a deal between Binance and the US Department of Justice, which provides for fines of 4.3 billion US dollars. As a result, investigations and lawsuits against Changpeng Zhao and Binance by the US Securities and Exchange Commission (SEC) and financial regulator CFTC will be dropped. Initial reports of a possible out-of-court settlement have been circulating since the beginning of the week.
Binance confirmed the spectacular deal in a detailed announcement, CZ spoke out via X. He founded Binance in 2017 and quickly turned it into the world’s largest crypto exchange with more than 150 million customers. Zhao now wrote, “Binance is no longer a baby. It is time for me to let Binance go and run.” He emphasized that the settlement with the US authorities showed that Binance had not misappropriated any customer funds and had never been involved in market manipulation. This can be seen as a dig at FTX and Sam Bankman-Fried. FTX had to file for bankruptcy in November 2023 and the criminal proceedings against Sam Bankman-Fried revealed that the subsidiary Alameda Research had misappropriated billions of US dollars of client funds for its own speculation.
Lawsuit against CZ and Binance reads like a business thriller
With the current Binance deal, previously withheld court documents have also been published. They show that the air had become thin for Changpeng Zhao. The prosecution could well have proved how CZ was personally involved in devising a strategy to allow major US clients to trade millions on Binance, despite this being prohibited by US law. “Better to ask for forgiveness than permission” is said to have been CZ’s motto to employees. One of the charges against Binance was aiding and abetting money laundering.
To be fair, it must be said that in the early years of Binance, the crypto industry in general operated largely unregulated in legal gray areas. The crypto exchange now also reminds us that it now employs hundreds of experts to ensure compliance with sanctions and cooperation with authorities. CZ escapes a worldwide arrest warrant thanks to the settlement, which costs him personally 50 million US dollars. However, he is due to appear before a US court in February 2024.
Changpeng Zhao remains the majority shareholder of Binance and is one of the richest people in the world with an estimated fortune of up to 100 billion US dollars. The position of CEO will be taken over with immediate effect by Richard Teng, who previously headed the regional markets department at Binance, according to a press release.
CZ resignation and billion-dollar deal from Binance
CZ was much more than just the CEO of Binance for the crypto scene. Zhao’s life story includes selling his apartment to acquire Bitcoin (BTC) early on and founding Binance. CZ regularly provided his almost 9 million followers on X (formerly Twitter) with self-deprecation, insights into the crypto industry and also warnings about scams. He now wants to take a break, but can imagine being available as a coach for founders afterwards.
The price curve of Binance (BNB) fell by almost 10 percent after the day’s news. With BNB, CZ had invented the so-called “discount token”, which is now copied by many other crypto exchanges and grants customers fee discounts and other bonuses. Binance is now allowed to continue its US business, but will be placed under independent supervision in the US for the coming years.
Conclusion: Battle between SEC and Binance ends with a bang
With CZ, the crypto scene is losing a highly respected authority. For many, the mistakes that Zhao now admits are disproportionate to the innovative strength that characterizes Binance. The US Securities and Exchange Commission (SEC), which is taking a hard line against the crypto industry, is likely to celebrate the deal internally as a great success. After all, it has already had to deal with court battles against Ripple (XRP) and Bitcoin ETFs this year. With the out-of-court settlement with Binance and CZ, however, the SEC is proving that it can also bring major opponents to their knees. This is not necessarily good news for ongoing SEC proceedings against Binance competitors such as Coinbase and Kraken. Meanwhile, Binance now sees itself free of legacy issues and the way open for the “next 50 years”.
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