The founder of Binance resigned from the company and pleaded guilty to breaking anti-money laundering laws of the United States as part of a $4.3 billion settlement resolving a years-long probe into the world’s largest crypto exchange. According to the Justice Department, CZ, the CEO of Binance at the time, prioritized growth over compliance and allowed billions of dollars to flow through the company without proper Know Your Customer (KYC) procedures. In a press conference Tuesday, Attorney General Merrick Garland said the penalties handed down to Zhao and Binance represented one of U.S. history’s most significant corporate settlements.
Changpeng Zhao, commonly called CZ, was arrested at his home in New York City on Tuesday morning and is scheduled to appear in court in Seattle on Wednesday. He faces up to 18 months in prison, but he will likely be allowed to remain free until the case concludes. He will also have to pay the United States a $50 million fine. The money will be distributed between the Commodity Futures Trading Commission, the Treasury Department’s Financial Crimes Enforcement Network, and other agencies participating in the investigation.
In a blog post, Binance announced it would take on Richard Teng, the company’s global head of regional markets, as its new CEO. The company also vowed to revamp its compliance policies. The announcement comes just days after Sam Bankman-Fried was convicted of multiple counts of fraud and conspiracy for his role in the collapse of FTX, a rival cryptocurrency exchange. The FTX founder is expected to face 115 years in prison when he’s sentenced next year.
Binance has been ordered to implement several measures to comply with the U.S. settlement, including a five-year monitoring agreement and increased scrutiny of suspicious transactions. It has also been ordered to retrain its staff and improve its systems and security. It has also agreed to submit reports to the Justice Department.
The investigation into Binance began in March when the CFTC filed a civil complaint alleging it was “facilitating billions of dollars worth of transactions on behalf of illicit actors, including terrorists and other criminals.” The CFTC’s complaint described messages between Binance Chief Compliance Officer Samuel Lim and other employees that showed a disregard for regulatory compliance. One message stated, “I HAZ NO CONFIDENCE IN OUR GEOFENCING,” which clearly references the exchange’s efforts to identify customers.
Despite the massive penalty, many experts say Binance will unlikely go the way of FTX and other fallen crypto titans. It will be difficult for the company to thrive with a government agency constantly looking over its shoulder, but it can transition with time. Regardless, the settlement and the arrest of its CEO are a significant blow to the industry. Fortune’s Emily Smith contributed to this report. Subscribe to Fortune’s daily newsletter for more news on the companies, people, and ideas shaping our world.
