Binance Users Withdraw Nearly $1 Billion From Crypto Exchange After CEO Pleads Guilty
Investors withdrew around $956 million from cryptocurrency exchange Binance in the past 24 hours after its boss, Changpeng Zhao, resigned and faced prison time after pleading guilty to resolve a long-running U.S. illicit finance investigation. years.
The deal, which will see Binance pay $4.3 billion to U.S. authorities to resolve the years-long investigation into illicit finance, has raised questions about the future of the world’s largest cryptocurrency exchange and marks another blow to an industry beset by scandals. . Zhao has been replaced by Richard Teng, a senior Binance executive who joined in 2021, the company said.
Data from crypto analytics platform Nansen, which does not include bitcoin flows, indicated that some investors had been taken aback by the news and withdrew assets from the exchange. Still, according to Nansen, more than $65 billion in assets remain on the platform.
“Binance has seen significant currency outflows since the announcement, but relative to its total holdings, it is quite small,” analysts at Nansen said.
By comparison, investors withdrew around $1.43 billion from the crypto exchange and its US subsidiary in June after the Securities and Exchange Commission sued the companies.
Among its alleged crimes, Binance failed to report more than 100,000 suspicious transactions, including organizations the United States described as terrorist groups: Hamas, Al Qaeda and the Islamic State of Iraq and Syria, authorities said.
The exchange also reported no transactions with websites dedicated to selling child sexual abuse materials and was one of the largest recipients of ransomware revenue, they said.
Binance did not immediately respond to a request for comment, but said on Tuesday that it had worked hard to fix its problems and had become “stronger, safer and even more secure.” Lawyers for Zhao, who founded Binance in 2017, did not respond to requests for comment on Wednesday. On Tuesday he admitted: “I made mistakes and I must take responsibility.”
While authorities have investigated Zhao and Binance for years, Zhao’s departure marks a dramatic development for one of the most powerful figures in the cryptocurrency industry. Zhao, who lives in Dubai, entered his plea in a Seattle court on Tuesday.
He agreed to pay a $50 million fine and faces a maximum prison sentence of 18 months under federal guidelines and agreed not to appeal any sentence up to that length.
Prosecutors will only take a position on the amount of jail time they seek closer to Zhao’s sentencing hearing on Feb. 23 in Seattle, a Justice Department spokesperson said Wednesday.
“But we reserve the right to seek a sentence above the guidelines.”
Zhao posted bail of $175 million, and another $15 million was held in a trust account, a court filing showed. He has agreed to return to the United States 14 days before sentencing. Reuters could not immediately determine his whereabouts on Wednesday.
Some legal experts said they did not expect Zhao to spend more than a year in prison, perhaps even less, citing Arthur Hayes, former CEO of cryptocurrency exchange BitMEX, who pleaded guilty to anti-money laundering violations.
Hayes was ultimately sentenced to six months of house arrest in 2022, despite the government asking for a prison sentence beyond the six to 12 month guidelines. Other high-level executives of the accused company also did not see prison sentences.
However, FTX founder Sam Bankman-Fried could spend decades in prison after being found guilty this month of defrauding customers of his now-bankrupt crypto exchange.
Legal experts told Reuters that, based on the alleged facts, prosecutors probably could have charged Zhao with more serious crimes carrying harsher sentences, but they had to weigh that against the likelihood that he would have stayed abroad to avoid his capture.
“Getting the CEO to plead guilty is nothing to scoff at,” said Daniel Silva, a partner at the Buchalter law firm and a formal federal prosecutor.
