$4.3B Settlement With the DOJ. CZ Pleads Guilty and Steps Down. All You Need to Know About the Fall of the Latest Strong Man of the Previous Bull Market and the Consequences for the Market.

By ssaurel | In Bitcoin We Trust | 22 Nov 2023


The Binance case has caused quite a stir in the cryptocurrency world in recent hours.

It concludes with a settlement between Binance and the DOJ. Binance will pay $4.3 billion to put an end to the lawsuits against the company. Binance founder and CEO Changpeng Zhao admitted his guilt in violating America's anti-money laundering laws.

The agreement between Binance and the DOJ also includes CZ's resignation as CEO of Binance.

One year after the explosion of the FTX scam, and while SBF's trial had caused quite a stir in recent weeks, this is probably the last figurehead of the previous Bull Market to disappear as the Bear Market draws to a close.

What can we learn from the Binance case?

First, keep in mind that the DOJ has been investigating Binance since 2018. The case has been in the news for the past few hours, but the DOJ had been on the Binance case for years when the exchange was accused of being used by criminals to transfer illicit funds.

From the outset, the investigation involved key Binance executives, including the CEO and founder, CZ. On the DOJ side, several members considered that the existing charges were sufficient to prosecute the platform. Others, on the contrary, wanted new investigations to be carried out. In parallel, multiple investigations were also launched by bodies such as the CFTC and the SEC, leading, for example, to a complaint by the latter in June 2023.

As you can see, the decision handed down on November 21, 2023, was the culmination of several complex years for Binance in America. Logically, 2023 was to bring certain measures for which CZ had prepared us with its famous "4":


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In recent days, things have accelerated.

On Monday, November 20, 2023, sources reported a possible deal between Binance and the DOJ, aimed at putting an end to the proceedings between them in return for a $4 billion fine.

The press conference on November 21, 2023, attended by members of the CFTC, the US Treasury, and prosecutors, was announced at 9 p.m. Early on, several US media outlets reported that Binance would agree to plead guilty to criminal charges.

Several charges were brought against the company, following collaboration between OFAC, FinCEN, and the DoJ:

  • Violations of banking secrecy laws.
  • Violations of sanctions programs.
  • Non-compliance with anti-money laundering obligations.

Specifically, Binance is accused of failing to implement effective programs to prevent suspicious transactions, of facilitating transactions with terrorists and money launderers, and of failing to implement KYC procedures.

Added to this is the fact that the DOJ accuses Binance and CZ of having sought from the outset to profit from the American market without implementing the necessary controls. As mentioned above, it is Binance's worldwide entity that is targeted here and not just Binance US.

In exchange for the recognition of these charges, Binance has agreed to :

  • Pay a civil penalty of $3.4 billion to FinCEN.
  • Pay a penalty of $968 million to OFAC (for a total of $4.3 billion).
  • Submit to a five-year oversight and meet significant compliance commitments.
  • Withdraw completely from the United States (what remains of Binance US being excluded from this measure).
  • Conduct a retrospective analysis to identify and report to FinCEN suspicious transactions previously omitted.
  • Cooperate fully through oversight by FinCEN and OFAC to ensure continued compliance with the terms of the agreement.

As for Binance's founder and CEO, CZ has pleaded guilty this time to violating anti-money laundering laws. CZ will remain a majority shareholder in Binance, but has been forced to:

  • Resign as CEO of Binance.
  • Pay a $50 million fine.
  • Resign from any position within Binance for 3 years.
  • Bail out of Binance for $175 million.
  • Return to the U.S. 14 days before his scheduled sentencing.

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On the evening of November 21, 2023, CZ spoke out. At his hearing in Seattle, CZ also expressed his desire to close this chapter in his life.

"Today, I have resigned as CEO of Binance. I've made mistakes and I have to take responsibility for them. It's better for our community, for Binance, and myself."

Ironic or calculated, CZ said three days ago of Sam Altman's departure from OpenAI:

"Knowing when to relinquish control of a company you founded is one of the trickiest decisions."

At the same time, former Binance executive Richard Teng has been appointed the company's new CEO. In a nutshell, he's a "Mr. Regulation" who will be sure to comply with US requirements. A new page has been turned!

The big question you have to ask yourself at this point is:

Why did Binance and CZ plead guilty?

Beyond the facts of the case, of which we have only a few details, the American legal system is designed to "incite" the accused to admit to the charges against them. Once a certain level of seriousness has been reached, the important thing for Binance is no longer to make the truth known but to avoid too serious consequences. Pleading guilty thus avoids a lengthy trial and gives Binance (and CZ) certainty about the outcome of the case.

In short, if Binance and CZ chose this route, it's because they probably risked worse otherwise. The American legal machine is sometimes too powerful to stand up to, whether you're guilty or not. Draw whatever conclusions you wish on your side.

What can we expect for Binance in the future?

Contrary to what many are saying, Binance's payment of a $4.3 billion fine does not mean the end of the story. If anything, it's the beginning...

From now on, Binance must appoint a monitor for five years. The monitor will ensure that the exchange complies with all applicable laws and implements a compliance program. He or she will also oversee the company's departure from the United States.

In practical terms, the U.S. Treasury will have access to Binance's records and systems for 5 years. Having studied several similar situations in the past, this means that everything the company does will be spied on and monitored, from A to Z.

Airbus, BNP Paribas, Alstom, and others have seen American agents monitor their every move, checking millions of documents... And while this usually lasts between 2 and 3 years, Binance is talking about 5 years ... An eternity on the scale of the cryptocurrency world.

Mind you, this does not mean that Binance will not continue its activities. The opposite is true. On the other hand, it does mean that the United States now has a total stranglehold on the exchange's business, with all the consequences imaginable.

Still on the subject of Binance, I don't know what will become of the SEC's proceedings against the exchange in recent months, which are separate from today's case. Will they be dropped? Will they lead to new negotiations?

That's still a big uncertainty at this stage!

You should also bear in mind that other countries may follow the U.S. lead and impose further sanctions on Binance. Even if this was not the case here, some jurisdictions may consider that Binance has been fairly sanctioned and that further measures are not desirable. This would then be an indirect application of a principle known as "Non bis in idem."

This principle, which is generally applied within the same jurisdiction, means that a person cannot be tried twice for the same facts. However, other countries may find Binance guilty of new offenses and impose their sanctions.

What can we expect for CZ in the future?

Beyond everything I've outlined in this article, CZ isn't out of the woods yet. As far as I know, he faces a maximum sentence of 10 years, but the agreement he has signed includes a waiver of his right to appeal, provided that his sentence does not exceed 18 months. It is therefore conceivable that he might one day spend some time in prison, but less than imagined. Once again, we'll have to wait and see over the coming months.

What can we expect for the cryptocurrency ecosystem?

That's the most difficult and forward-looking part. Everything I say next should be taken with a grain of salt.

The information shared about the agreement signed by Binance and CZ leaves me with many questions. By signing this agreement, Binance has agreed to relinquish full ownership of its business for 5 years. And Binance is no mean feat. In fact, it is the leading crypto exchange, with a significant concentration of transaction volumes on the crypto market.

We can therefore expect Binance to fall into line, to develop more slowly, and to be less daring... In short, to be controlled.

So what will be the consequences of this loss of power? Negative in the short term, positive in the long term?

It's hard to say!

Some will say that this measure opens the door to real competition in the exchange platform sector. Others will say that Binance is too big for this not to be difficult, at least in the short term. Some will also say that this American monitoring will enable Binance to become a model in the sector, offering it a huge market share. Others will say that it's impossible to truly align with the growth of the ecosystem without bending certain rules.

This last point seems fair enough to me.

If the majority of exchanges are at a loss when it comes to compliance, it's partly due to shenanigans, but it's also inevitable. Does the person who doesn't cheat, even a little, really have a chance of surviving? Nothing is less certain.

One thing is certain, however: the USA is dealing a serious blow to American exchanges' main competitor. If the country intends to enable its own companies to take market share, the way ahead seems clear. But is this its intention? The SEC's recent attacks on Coinbase and Kraken suggest otherwise. The next few months, through the resolution of certain lawsuits and the presidential elections, will no doubt give us a clearer picture.

However, let's not forget that BlackRock owns 10% of Coinbase, for example. The same BlackRock that is preparing to launch a Bitcoin Spot ETF...

Apart from that, what has just happened to Binance suggests that new platforms will suffer the same fate. Which are the ones that are structured and respect what Binance has been criticized for? Very few, at best. We can therefore imagine that many of them will seek to comply more closely with American and foreign regulations. In the short term, this means sacrifices and slower development. In short, it means trouble for exotic players.

In the long term, however, this could lead to the development of more conventional companies, more likely to be viewed positively by regulators. So, depending on one's point of view and priorities, there are pros and cons.

In any case, it will be very interesting to see what Binance does and how it does it over the coming months. KYC, listings, proof of liability, innovations, investments... We'll all be watching to see how Binance complies in all these areas.

Many other questions could be asked, such as the future of the BNB token, the future of Binance without the US market, and the image sent back to the general public... But let's wait and see how these thorny issues play out.


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The Bitcoin Mining Industry Is Gearing Up for the All-Out War That Will Take Place After the Fourth Halving in April 2024.

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Let's take a look at the forces at work as we approach the end of 2023.

Link: https://inbitcoinwetrust.substack.com/p/the-bitcoin-mining-industry-is-gearing

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ssaurel
ssaurel Verified Member

Entrepreneur / Developer / Blogger / Author.


In Bitcoin We Trust
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