CZ Released From Custody After Posting $175M Bond; DoJ Agreement Required Him To Step Down

Binance founder Changpeng Zhao (CZ) was released from custody after posting a $175 million personal recognizance bond. This followed his settlement agreement with the Department of Justice, which entailed not only a fine of $50 million but also Zhao's resignation from his current position.

This shows that Zhao's decision to resign was not voluntary but necessary for the survival of Binance and the broader cryptocurrency industry. His sentencing is scheduled for Feb. 23, 2024.

Zhao confirmed Tuesday that he has resigned as the CEO of Binance, the company he founded in July 2017. Binance is currently the world's largest crypto exchange platform by trading volume.

Binance and Zhao were presented with a settlement agreement by the DoJ as part of a move to not push for a trial and allow the exchange to continue with its operations instead of succumbing to a potential collapse that could negatively impact the crypto market and investors.

Zhao pleaded guilty to violating the Bank Secrecy Act in a federal court in Seattle on Tuesday after federal officials accused him of directing Binance to allow customers in the U.S. to use the exchange without conducting proper checks for money laundering.

"Changpeng Zhao made Binance, the company he founded and ran as CEO, into the largest cryptocurrency exchange in the world by targeting U.S. customers, but refused to comply with U.S. law," said Nicole M. Argentieri, Acting Assistant Attorney General of the Justice Department's Criminal Division.

"Binance's and Zhao's willful violations of anti-money laundering and sanctions laws threatened the U.S. financial system and our national security, and each of them has now pleaded guilty. Make no mistake: when you place profits over compliance with the law, you will answer for your crimes in the United States," Argentieri added.

The court filing revealed that, in addition to the bond, Zhao posted $15 million held in a trust account by Davis Wright Tremaine. He also had to find two guarantors who pledged $250,000 and $100,000, respectively and agreed to forfeit the funds if he violated the terms of his release.

Zhao is prohibited from breaking the law, and tampering with victims or witnesses, as well as taking non-prescribed controlled substances.

He is allowed to leave the U.S. but is required to return 14 days before his sentencing. Zhao has agreed to stay in Seattle until Nov. 27 so that lawyers from both camps can hash out details with the judge overseeing the case.

Since Zhao pleaded guilty pursuant to an agreement, he technically waived his right to appeal any sentence of more than 18 months, said Magistrate Judge Brian Tsuchida.

Aside from the DOJ, Binance settled charges with the Financial Crimes Enforcement Network (FinCEN), Office of Foreign Asset Control (OFAC) and the Commodity Futures Trading Commission (CFTC).

"From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash. Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine – transactions for which Binance profited with significant fees," said Acting U.S. Attorney Tessa M. Gorman for the Western District of Washington.

Attorney General Merrick B. Garland noted, "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 U.S. history. In just the past month, the Justice Department has successfully prosecuted the CEOs of two of the world's largest cryptocurrency exchanges in two separate criminal cases. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal."

In a statement, Treasury Secretary Janet L. Yellen said, "Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform. Today's historic penalties and monitorship to ensure compliance with U.S. law and regulations mark a milestone for the virtual currency industry. Any institution, wherever located, that wants to reap the benefits of the U.S. financial system must also play by the rules that keep us all safe from terrorists, foreign adversaries, and crime or face the consequences."