Binance Founder Changpeng Zhao, also known as CZ, has pleaded guilty to violating US anti-money laundering rules and agreed to pay a $50 million fine and step down as CEO from the crypto exchange. But this doesn't mark the end of Binance's legal woes.
Yahoo Finance’s David Hollerith explains why there could be more legal challenges ahead for Binance and what the firm's $4.3 billion settlement with the US government means for the crypto industry.
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- Founder of Binance, CZ, pleading guilty to money laundering violations in another stunning blow to the crypto industry. As part of his guilty plea, Zhao agreed to pay a $50 million fine and step down as the company CEO. Zhao is one of the most powerful and influential figures in the industry. So what comes next for Binance and the industry? What tasks at hand are for the company's new head, Richard Teng? Let's bring in now Yahoo Finance's David Hollerith to explain. David, the details, please.
DAVID HOLLERITH: Jared, so now that we have this legal pact with the US authorities, Binance is going to be playing what we could say compliance catch up in a big way. It has about three years of transactions worth about several trillions of dollars in terms of customer volume that it needs to go back through.
Previously, part of these fines were that the company did not file suspicious activity reports, and it's got to go back and do that. And that's going to take a lot of time. And these reports are expected to lead to other investigations, which could complicate things for the firm if more illicit activity on their part is revealed. It could also make matters worse for the customers if any of the customers were also engaged in illicit activity.
The pact also that we saw yesterday didn't include or end Binance's legal troubles with the SEC. They are currently in a civil lawsuit with the SEC that came out back in June alleging that Binance violated investor securities laws, mishandled customer funds. And that matter is still at hand in court.
Finally, this $4 billion fine that Binance has agreed to pay based on analysis, third-party analysis from actually a director at Coinbase, it does appear just based on what can be seen through the blockchain that Binance does have enough money to pay this. So in the short-term, they are OK and they will not need to make any additional crypto sales, which is important for the market.
But I think largely looking forward under this new CEO, Richard Teng, who we haven't really heard from yet. He did make a statement yesterday. But reporters, myself including, are very interested to speak with him. He's going to need to prove in the coming weeks that Binance can continue its business model, it can continue to work now that it is playing by the full rules of anti-money laundering and sanctions laws under the US jurisdiction.
And so we're going to want to watch to see that and pay a lot of attention to Binance's market share. It was once held the majority of crypto market activity in the past. And now, we're really going to want to see if that's going to continue to shrink as it has in the past couple of months.
- All right, Dan Hollerith, thanks so much for the latest on that. Certainly a story we will continue to watch.