In
August,
before
it
was
fully
clear
the
U.S.
Department
of
Justice
(DOJ)
would
bring
charges
against
Binance,
news
leaked
that
the
federal
prosecutors
building
the
case
were
worried
an
indictment
could
cause
customers
to
panic
and
withdraw
their
funds
en
masse,
potentially
creating
panic
in
the
crypto
markets,
wider
industry
contagion
or
even
a
liquidity
shortfall.
On
Tuesday,
the
DOJ
reached
a
“historic”
settlement
with
the
world’s
largest
exchange.
The
stated
crimes
are
sweeping,
and
the
penalty
is
massive.
Binance
will
pay
a
$4.3
billion
fine
for
violating
money
transmission
laws
and
U.S.
sanctions,
and
its
CEO,
Changpeng
“CZ”
Zhao,
who
founded
the
firm
in
2017
and
built
it
into
a
behemoth,
was
forced
to
resign.
Withdrawals
over
the
past
day
have
ticked
up
to
$566.8
million,
according
to
DefiLlama’s
centralized
exchange
dashboard.
Customers
rushing
to
yank
their
money
out
of
FTX
ruined
that
exchange
because
its
operators
fraudulently
embezzled
the
money.
On
the
other
hand,
at
this
point,
Binance
appears
to
be
sound.
Its
latest
“proof
of
reserves”
report,
an
imperfect
but
voluntary
attestation
of
an
exchange’s
holdings,
shows
the
exchange
holds
$65
billion
worth
of
crypto
assets
alone.
DefiLlama
counts
it
at
$68.4
billion.
Further,
Binance
appears
to
be
overcollateralized
for
many
of
the
largest
assets
on
its
books,
like
bitcoin
(BTC),
ether
(ETH),
tether
(USDT)
and
others,
meaning
Binance’s
net
balances
are
more
than
it
owes
customers.
In
other
words,
if
every
Binance
customer
withdrew
every
bitcoin
they
owned,
the
exchange
would
have
bitcoins
to
spare.
The
loss
of
Zhao
will
be
felt.
He
was
not
the
firm’s
figurehead,
but
its
leader.
He
communicated
to
his
fans,
supporters
and
users
in
figurative
language
–
often
being
able
to
blow
off
bad
news
with
a
tweet.
Many
times
this
year,
when
the
bad
news
kept
coming,
he’d
tweet
out
a
single
number:
“4.”
That
stood
for
his
four
principles,
to
ignore
the
“FUD”
—
or
fear,
uncertainty
and
doubt”
—
and
remain
positive.
See
also
Binance
Needs
to
Get
Off
Twitter
|
Opinion
“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,”
Zhao
wrote
Tuesday
on
X/Twitter.
If
these
inconveniences
affect
customer
experiences,
it
may
be
the
only
thing
capable
of
killing
the
exchange
Zhao
is
personally
on
the
hook
for
$200
million
in
civil
and
criminal
penalties,
which
for
an
early
crypto
adopter
whose
net
worth
ranges
from
$17
million
on
the
low
end
deca-billions
is
a
small
price
to
pay
to
settle
charges
from
a
coordinated
investigation
involving
the
DOJ,
CFTC
and
two
enforcement
departments
under
the
Treasury
Departments,
FinCEN
and
OFAC.
Binance,
no
stranger
to
regulatory
action,
appears
to
have
had
a
contingency
plan
in
the
works
for
a
while,
and
reacted
quickly
to
its
decapitation.
Binance’s
head
of
regional
markets,
Richard
Teng,
who
was
hired
in
2021
and
was
a
rumored
CZ
successor,
will
step
up
as
CEO.
This
quick
promotion,
which
was
already
in
the
public
consciousness,
has
done
a
lot
to
stymie
disorder
–
especially
considering
Zhao
might
spend
the
next
18
months
to
10
years
in
a
U.S.
federal
prison.
While
Yi
He,
Zhao’s
co-founder,
rumored
romantic
partner
and
“chief
customer
service
officer”
(a
self-defined
role
that
encapsulates
the
firm’s
“business,
marketing
and
branding
strategy,”
according
to
her
company
bio),
appears
to
be
staying
on.
Although
Zhao
won’t
be
allowed
any
involvement
with
Binance
for
at
least
three
years,
according
to
the
government’s
terms,
He
could
potentially
act
as
an
informal
conduit
between
the
company
and
its
largest
shareholder,
Zhao.
In
many
ways,
Binance
got
off
easy.
It
has
to
pay
a
massive
penalty,
yes,
but
it
looks
like
it
has
money
on
the
books
to
survive.
Binance
will
also
need
to
appoint
an
independent
monitor
and
send
compliance
reports
to
the
U.S.
government.
ConsenSys
chief
lawyer
Bill
Hughes
said
this
will
be
a
huge
boon
to
U.S.
criminal
investigators:
“All
Binance
transaction
records
that
exist
today,
which
may
very
well
go
back
to
the
beginning
of
the
exchange,
are
there
for
the
taking
by
law
enforcement.
They
will
show
how
illicit
payments
flowed
through
the
exchange.
Law
enforcement
will
have
full
access
to
an
ocean
of
intelligence
about
illicit
flows
inside
the
blackbox
of
that
exchange
to
match
against
the
immutable
record
of
transactions
you
find
on-chain.”
Perhaps
Binance
will
never
end
up
in
regulatory
good
graces,
but
paying
restitution,
coming
into
compliance
and
ending
a
multi-year
criminal
investigation
that
held
like
a
sword
of
Damocles
over
the
exchange
could
allow
it
to
turn
a
new
leaf.
(And
Zhao,
who
has
essentially
lived
an
itinerant
lifestyle
since
his
exchange
was
kicked
out
of
China
the
same
year
it
was
founded,
2017,
can
finally
take
a
breath.)
Perhaps
now
the
European
countries
including
France,
the
Netherlands
and
even
the
tax
shelter
Cyprus,
which
either
declined
granting
Binance
a
license
to
operate
or
opened
up
their
own
regulatory
investigations,
will
give
the
exchange
a
second
chance.
Binance,
at
the
same
time
it
was
required
to
pull
out
of
several
jurisdictions,
has
in
some
ways
grown
over
the
past
year
while
the
rest
of
the
industry
retracted.
Binance
could
be
said
to
be
the
one
of
the
few
firms
that
benefited
from
the
collapse
of
rival
FTX,
absorbing
a
global
crypto-trading
customer
base.
In
his
first
public
announcement
as
CEO,
Teng
said
the
exchange
boasts
over
150
million
users,
and
thousands
of
employees.
The
exchange
also
runs
divisions
in
nearly
every
crypto
vertical,
maintains
one
of
the
most
used
DeFi
chains
and
made
moves
into
AI.
Nothing
is
total
insurance,
but
the
exchange
still
has
momentum.
It
also
has
other
roadblocks
ahead,
including
a
civil
lawsuit
brought
by
the
U.S.
Securities
and
Exchange
Commission
(SEC),
alleging
a
number
of
financial
violations.
The
company
has
also
been
hemorrhaging
executives,
and
in
July
after
a
round
of
layoffs
it
was
reported
the
exchange
could
ultimately
cull
a
third
of
its
global
workforce.
In
October,
the
company’s
U.S.
division,
Binance.US,
modified
its
terms
of
use,
making
it
so
users
can
no
longer
withdraw
dollars
directly
from
the
platform
—
except
through
stablecoins.
That
same
month,
Binance
onboarded
“a
number
of
new
regulated
and
authorized
fiat
partners”
to
enable
users
to
deposit
and
withdraw
euros,
after
its
former
partner
Paysafe
halted
services
for
the
exchange.
If
these
inconveniences
affect
customer
experiences,
it
may
be
the
only
thing
capable
of
killing
the
exchange.
Binance,
in
some
sense,
was
beloved
because
it
embodied
the
cowboy,
outlaw
mentality
of
crypto.
It’s
unclear
what
sort
of
psychological
affect
the
denouement
of
the
DOJ’s
investigation,
the
unprecedented
fine
or
the
possible
imprisonment
of
the
exchange’s
former
CEO
will
have
on
such
an
audience.
See
also:
Binance’s
CZ
and
the
End
of
the
‘Borderless’
Crypto
Company
|
Opinion
It’s
also
unclear
whether
the
magnitude
of
the
exchange’s
crimes
will
taint
its
reputation,
even
among
the
staunchest
crypto-anarchists.
“The
Binance
platform
was
facilitating
some
truly
horrible
stuff
–
everything
from
terrorist
financing
to
ransomware
actions,
child
pornography
and
various
scams
and
frauds,”
a
senior
Treasury
official
told
reporters.
Binance,
to
its
credit,
has
copped
to
its
mistakes.
The
official
company
statement
repeated
what
it
has
said
before,
that
the
company
“grew
at
an
extremely
fast
pace”
and
“made
misguided
decisions
along
the
way.”
For
almost
its
entire
existence
–
barring
the
last
couple
of
months,
when
Binance’s
PR
and
legal
teams
seemed
to
make
a
show
of
the
exchange
prioritizing
compliance
–
the
exchange
acted
with
extreme
disregard
to
U.S.
and
global
regulations.
Zhao
once
boasted
the
exchange
had
no
headquarters
because
Bitcoin
doesn’t.
It
opened
and
closed
subsidiaries
in
known
tax
havens
like
Bermuda
(in
2018,
planning
to
develop
a
regulatory
framework
that
didn’t
pan
out),
Jersey
(shuttered
in
2020)
and
Malta
(ousted
in
2021).
“Today,
Binance
takes
responsibility
for
this
past
chapter,”
the
company’s
statement
continued.
Perhaps
its
the
only
thing
it
can
say,
to
remain
a
going
concern.
Many
questions
remain:
will
a
compliant
Binance
be
able
to
grow?
Will
Binance
finally
find
a
home?
And
if
so,
will
it
then
lose
its
place
in
its
customer’s
hearts?