With a resigning CEO and a record-breaking payout of billions of dollars – Binance’s November settlement was just the tip of the iceberg of a year filled with regulatory woes.
In this article we highlight the key events of 2023 that led to Binance agreeing to pay some of the largest fines in US history.
March 2023: CFTC sues Binance
In March, the US Commodity Futures and Trading Commission (CFTC) charged Binance and two of its top executives with "willful evasion of US law", seeking
penalties and permanent trading and registration bans against the digital asset firm.
At the time, CFTC Chairman Rostin Behnam stated: “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will
not tolerate willful avoidance of US law."
June 2023: Binance fails to get Netherlands license and faces French investigation
In June, Binance failed in its bid to secure a virtual asset service provider (VASP) license in the Netherlands, forcing
the crypto exchange to exit the country.
On top of that, French prosecutors started investigating Binance for concerns regarding possible "aggravated money laundering by taking part in investment operations, concealment and conversion, the latter being carried out by perpetrators of offenses having
generated profits."
June 2023: SEC sues Binance
To make matters worse, Binance was hit with
another lawsuit in June. The SEC alleged a host of securities law violations and accused the crypto exchange of engaging in an "extensive web of deception."
When the charges were announced, SEC chair Gary Gensler commented: "Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.
"As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor
funds and crypto assets were custodied.
"They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value US customers on their platforms."
October 2023: Binance stops accepting new UK customers
In October, the Financial Conduct Authority (FCA) introduced new rules outlining that firms wishing to promote cryptoassets in the UK must be authorised or
registered by the FCA, or alternatively have their marketing approved by an authorised firm.
Binance initially engaged FCA-authorised firm Rebuildingsociety.com to review and approve financial promotions in compliance with the new rules, however, the FCA stated shortly after that Rebuildingsociety.com is not licensed to do this. The trading platform
then had to stop accepting new UK customers while working to find a partner to help it meet the new crypto asset promotion rules.
November 2023: CEO resigns after pleading guilty to US AML charges
Late in November, Binance
agreed to pay $4.3 billion in penalties and forfeitures in order to settle a long-running investigation by the US Department of Justice and other federal agencies. Founder Changpeng "CZ" Zhao pled guilty to violating anti-money laundering charges and stepped
down as CEO, with Richard Teng, Binance’s head of regional markets, taking over as the new CEO.
The Department of Justice accused Binance of helping users bypass sanctions across the world and making it easy for criminals and terrorists to move money. The department
commented: "Between August 2017 and April 2022, there were direct transfers of approximately $106 million in bitcoin to Binance.com wallets from Hydra. Hydra was a popular Russian darknet marketplace,
frequently utilised by criminals, that facilitated the sale of illegal goods and services.”
"I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself," Zhao posted on X (formerly Twitter) after resigning.
Along with the Department of Justice lawsuit, Binance also settled the charges made by the CFTC in March in this record-breaking deal.
While the Novmeber deal ended investigations by the Department of Justice and other federal agencies, Binance might still face hefty penalties from the Securities and Exchange Commission (SEC). The SEC was
notably absent among the federal officials announcing settlements with the exchange.