- Blockchain Council
- November 22, 2023
In a seismic development within the cryptocurrency realm, Changpeng Zhao, commonly known as CZ, has relinquished his role as the Founder and CEO of Binance, the world’s largest cryptocurrency exchange. This unprecedented move comes in the wake of a legal saga, with Zhao pleading guilty to violating US anti-money laundering laws, as disclosed in a Reuters report.
The courtroom drama unfolded on November 21 in a Seattle court, where Changpeng Zhao agreed to a monumental $4.3 billion settlement deal. This includes a staggering personal payout of $50 million, positioning it among the largest corporate penalties in the history of the United States, according to statements from prosecutors deeply involved in the case.
As part of the settlement terms, Binance is obligated to disburse $1.81 billion within the next 15 months, followed by an additional forfeiture of $2.51 billion. This landmark agreement sends ripples through the cryptocurrency sector, coming on the heels of FTX’s Sam Bankman-Fried facing a conviction for fraud earlier this month.
Despite the significant financial setbacks, legal experts view this settlement as a strategic move that safeguards Zhao’s personal wealth and allows him to retain a stake in Binance, a departure from the fate of FTX’s leadership.
In an official statement, Zhao expressed the difficulty of stepping down emotionally but emphasized that it was the right decision. He acknowledged his mistakes, stating, “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.” This admission adds a layer of transparency and accountability to the situation, as Zhao takes personal responsibility for the legal transgressions.
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is…
— CZ 🔶 Binance (@cz_binance) November 21, 2023
Binance, in a press statement, acknowledged the lack of appropriate compliance controls during its initial launch. The exchange expressed regret, stating, “When Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have.” This acknowledgment aligns with the regulatory concerns raised by US authorities and underscores the need for robust compliance measures in the cryptocurrency sector.
Richard Teng, the newly appointed CEO, reinforced Binance’s commitment to rectifying past shortcomings. In a social media post, he stated, “I have accepted this role so that we can continue to meet and exceed the expectations of stakeholders while achieving our core mission, the freedom of money.” Teng’s emphasis on security, transparency, compliance, and growth signals a concerted effort to rebuild trust and navigate the company through its next phase.
Changpeng Zhao, a 44-year-old Canadian citizen born in China’s Jiangsu province, has a compelling personal story that intertwines with the evolution of Binance. His family’s migration to Vancouver at the age of 12, escaping the aftermath of Mao’s Cultural Revolution, sets the backdrop for Zhao’s resilience and determination.
With a degree in computer science from McGill University, Zhao entered the professional realm with roles building trading systems in New York and Tokyo. His foray into the cryptocurrency domain began in 2013 during a poker game in Shanghai, where he was urged to invest 10% of his net worth in Bitcoin. This pivotal decision, coupled with selling his apartment for Bitcoin, laid the foundation for Zhao’s immersion in the crypto world.
Before founding Binance in 2017, Zhao’s journey included stints at crypto companies OKCoin and Blockchain.info. His partnership with Chief Marketing Officer Yi He, with whom he shares children, led to the establishment of Binance. The company’s name, a fusion of binary and finance, reflects Zhao’s tech-centric background.
Under Zhao’s leadership, Binance swiftly ascended to become the largest cryptocurrency exchange globally, solidifying his position as one of the wealthiest individuals in the sector. According to the Bloomberg Billionaire’s Index, Zhao currently holds the 68th position globally, boasting a substantial wealth of $23.5 billion.
The legal challenges faced by Zhao and Binance have culminated in a multifaceted settlement involving various US agencies, including the Department of Justice, Commodities Futures Trading Commission, and the Department of Treasury’s Financial Crimes Enforcement Network and Office of Foreign Assets Control.
The charges levied against Binance include anti-money laundering violations, sanctions violations, and operating an unregistered exchange. The settlement, amounting to $4.3 billion, signifies one of the largest corporate penalties in US history.
US Attorney General Merrick Garland emphasized the significance of the case during a press conference, stating, “Because of the crimes committed, Binance became the largest cryptocurrency exchange in the world. Now, Binance has paid one of the largest corporate penalties in US history.” This acknowledgment underscores the gravity of the legal infractions committed by Binance.
The Treasury Department, in a statement, described the action as “unprecedented” and highlighted Binance’s failure to prevent and report “suspicious transactions with terrorists,” citing connections to groups such as Al Qaeda and ISIS. The settlement includes a $3.4 billion penalty to FinCEN and $968 million to OFAC, along with stringent compliance requirements and monitoring for a period of five years.
Richard Teng, a senior executive at Binance who joined the company in 2021, has succeeded Zhao as the CEO of Binance. In Zhao’s words, “With CZ, and our leadership team’s support, Richard Teng will ensure Binance delivers on our next phase of security, transparency, compliance, and growth.” This strategic transition underscores the continuity within the company, with Teng stepping into a leadership role during a critical juncture.
It is an honour and with the deepest humility that I step into the role of Binance’s new CEO.
We operate the world's largest cryptocurrency exchange by volume. The trust placed on us by our 150m users and thousands of employees is a responsibility that I take seriously and hold…
— Richard Teng (@_RichardTeng) November 21, 2023
Richard Teng’s professional background adds a layer of intrigue to the unfolding narrative at Binance. Prior to his role at Binance, Teng served as the CEO of Abu Dhabi Global Market, the financial services regulator of the UAE capital. His global experience also includes serving as the Director of Corporate Finance at the Monetary Authority of Singapore. This wealth of experience positions Teng as a seasoned leader with over three decades of financial services and regulatory expertise.
In a post on the platform formerly known as Twitter, Teng expressed his commitment to the role, stating, “With CZ, and our leadership team’s support, I have accepted this role so that we can continue to meet and exceed the expectations of stakeholders while achieving our core mission, the freedom of money.” His focus, as outlined in the post, revolves around three key areas: reassuring users of the financial strength, security, and safety of the company, collaborating with regulators globally to uphold high standards, and working with partners to drive growth and adoption of Web3.
The cryptocurrency industry now faces a pivotal moment as it grapples with the fallout from Binance’s legal challenges. The departure of Changpeng Zhao from the CEO position, coupled with the appointment of Richard Teng, raises questions about the company’s future trajectory and the broader regulatory landscape.
Brian Armstrong, CEO and co-founder of Binance’s US competitor Coinbase, sees this development as an opportunity for the industry to embark on a new chapter. In a post on social media, Armstrong stated, “an opportunity to start a new chapter for this industry.” He expressed hope that the regulatory actions against Binance would contribute to much-needed clarity in the industry.
As the cryptocurrency industry grapples with these unprecedented shifts, the resignation of Changpeng Zhao and the appointment of Richard Teng mark a significant chapter in its history. The legal challenges and subsequent settlement reshape the landscape, leaving room for both apprehension and the potential for positive regulatory evolution.
The coming months will undoubtedly unfold with heightened scrutiny, with industry leaders closely observing how these events will shape regulatory attitudes and impact the broader crypto landscape. Amidst the uncertainty, the industry faces an opportunity for resilience, adaptation, and a renewed commitment to transparency and accountability.