For years, the world's largest cryptocurrency exchange, Binance, has been dogged by rumors of malfeasance and federal investigations. Today, in a set of accusations that will rock the already tumultuous world of crypto, the US Department of Justice revealed criminal charges against the company and its chief executive, Changpeng Zhao, claiming they enabled the laundering of vast flows of dirty money across the globe, from Cuba to Iran to Russia.
The indictment against Binance, unsealed ahead of a press conference by US attorney general Merrick Garland, accuses the company of billions of dollars of transactions that violated US anti-money-laundering laws, including well over a billion dollars of actual criminal transactions and sanctions evasions. Separate indictments specifically charge Zhao and former chief compliance officer Samuel Lim with allowing those illicit transactions to take place.
Garland announced Tuesday that Zhao had pleaded guilty to a felony money-laundering violations charge and that the company had agreed to pay a $4.3 billion fine as part of a settlement with the DOJ. Zhao has also stepped down from his role running the company and agreed to pay a $150 million fine. Lim must pay $1.5 million as part of the settlement.
“Binance prioritized its profits over the safety of the American people,” Garland said during the press conference. “Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed. Now it is paying one of the largest corporate penalties in US history."
The charging documents describe a company that allegedly turned a blind eye, sometimes willfully and knowingly, prosecutors claim, to the trading of funds from sanctioned countries and regions like Iran, Cuba, Syria, and Russian-occupied areas of Ukraine such as Crimea and Donbas, as well as the now defunct criminal dark-web market Hydra.
“Their illicit financing problems were overwhelming to an unsolvable degree,” a former Binance executive tells WIRED, echoing the charges. The former executive was granted anonymity because they are not authorized to speak about internal company matters. “It was a nightmare trying to get a handle on all the sanctions evasions taking place. The execs were more and more hostile to compliance teams trying to mitigate a lot of issues that they were seeing.”
The indictment alleges, for instance, that Binance allowed more than 1.1 million transactions between US persons and Iranians—each one an alleged sanctions violation—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.
US prosecutors claim Binance processed around $275 million in both deposits and withdrawals to BestMixer, a cryptocurrency “mixing” service designed to make cryptocurrency transactions harder to trace, before Dutch law enforcement shut down that service in May 2019 as part of a money-laundering investigation. The charging document goes on to allege that Binance users included ransomware gangs, hackers who had plundered crypto from other exchanges, and scammers. In comments at Tuesday's press conference, US treasury secretary Janet Yellen added that Binance had facilitated transactions with terrorist groups “including Hamas,” which the US designates as a terrorist organization, as well as purveyors of child sexual abuse material.
