NEW YORK: Investors pulled about US$956 million (RM447.5 million) from crypto exchange Binance over the past 24 hours after its chief, Changpeng Zhao, stepped down and faced prison time after pleading guilty on Tuesday to settle a years-long US illicit finance probe.
The deal, in which Binance will pay US$4.3 billion to US authorities, raises questions over the future of the world’s largest crypto exchange and marks another blow for an industry beset by scandals. Zhao has been replaced by Richard Teng, a senior Binance executive who joined in 2021, the company said.
It remained unclear on Wednesday (Nov 22) how much jail time, if any, Zhao would ultimately serve, and how much influence he – as Binance’s founder and major shareholder – could continue to exert on Binance under the terms of the settlement.
Some analysts also noted that the deal was unlikely to end the exchange’s US legal woes, with Securities and Exchange Commission charges alleging Binance broke US securities laws still unresolved.
“Binance is not entirely out of the woods. The ongoing civil lawsuit with the SEC remains a concern for the exchange, which (is) likely to result in further fines,” wrote Robert Le, a crypto analyst at data firm PitchBook.
Data from crypto analytics platform Nansen, which does not include bitcoin flows, signalled some investors had been rattled by the news, pulling US$956 million from the exchange. Still, the outflows were small relative to the more than US$65 billion of assets that remain on Binance, Nansen said.
As it strived for market dominance, Binance shunned key checks Zhao believed would turn customers off, authorities said.
It failed to report more than 100,000 suspicious transactions, including with organisations the US described as terrorist groups and never reported transactions with websites dedicated to selling child sexual abuse materials.
Binance did not immediately respond to a request for comment, but said on Tuesday it had worked hard to make Binance “safer and even more secure”. Lawyers for Zhao did not respond to requests for comment on Wednesday. On Tuesday, he conceded “I made mistakes, and I must take responsibility.”
While authorities have probed Zhao and Binance since at least 2018, Zhao’s exit marks a dramatic development for one of the most powerful figures in the crypto industry. Zhao, who resides in the United Arab Emirates, entered his plea in a Seattle court on Tuesday.
He faces a maximum prison sentence of 18 months under federal guidelines and has agreed not to appeal any sentence up to that length. Prosecutors will take a position on how much jail time to seek closer to Zhao’s on Feb 23 sentencing hearing in Seattle, a Justice Department spokesperson said on Wednesday.
“But we do reserve the right to seek a sentence above the guidelines.”
Zhao paid a US$175 million bail bond, with another US$15 million held in a trust account, a court filing showed. He has agreed to return to the United States 14 days before sentencing.
The settlement also bars Zhao from “any present or future involvement in operating or managing” Binance, which he founded in 2017 and has maintained a tight grip on since. He remains a major shareholder and said on Tuesday he will be “available to the team to consult as needed, consistent” with the deal. – Reuters
