22-11-2023 (WASHINGTON) Binance Holdings, the world’s largest cryptocurrency exchange, and its CEO Zhao Changpeng have been hit with a hefty fine and a guilty plea for failing to comply with anti-money laundering laws. The United States government’s announcement of a $4.3 billion fine and Zhao’s admission of guilt puts the spotlight on terrorist organizations, including Hamas, that allegedly received funds through the exchange.
The US Commodity Futures Trading Commission (CFTC) filed a lawsuit in March, revealing conversations between Binance’s former chief compliance officer, Samuel Lim, and a colleague. In the chat messages, Lim acknowledged that Binance was being used to funnel money to Hamas, with terrorists typically sending “small sums.” The colleague responded dismissively, stating that Hamas could barely purchase an AK47 with $600.
The implications of these conversations have now caught up with Binance and Zhao. The recent settlement not only resolves the CFTC suit but also includes the imposition of fines and a guilty plea for non-compliance with anti-money laundering laws. The US Treasury Department, in its statement, specifically named Hamas, Al Qaeda, Palestinian Islamic Jihad, and the Islamic State of Iraq and Syria as terrorist organizations that received funds through Binance.
The settlement and Zhao’s guilty plea come at a time when Hamas is engaged in a conflict with Israel, triggered by their attacks in early October, resulting in the deaths of over 1,200 people and the hostage-taking of more than 200. Israel responded by invading Gaza, leading to thousands more casualties.
During a press conference, US Attorney General Merrick Garland emphasized that Zhao had “willfully violated federal law” by failing to guard against money laundering and terrorist financing, as required by financial institutions.
The US government’s investigation revealed that Binance had neglected to report suspicious transactions involving terrorists. As part of the settlement, the company is now obligated to report such activities going forward and review past transactions that should have been disclosed.
US Attorney General Garland stated, “This will advance our criminal investigations into malicious cyber activity and terrorism fundraising, including the use of cryptocurrency exchanges to support groups such as Hamas.”
The fines imposed on Binance will be allocated to the US Treasury’s Financial Crimes Enforcement Network and the Office of Foreign Assets Control, with $3.4 billion going to the former and $968 million to the latter. The fine imposed by the Financial Crimes Enforcement Network is the largest in the bureau’s history.
This case highlights a concerning trend among some cryptocurrency entrepreneurs who have exhibited a cavalier attitude towards the use of their platforms by terrorists and other illicit actors. In a similar vein, the co-founders of BitMEX, Arthur Hayes, Benjamin Delo, and Samuel Reed, pleaded guilty last year for their failure to implement anti-money laundering and customer identification policies at their crypto derivatives exchange.
Furthermore, former Ethereum Foundation researcher Virgil Griffith was sentenced to over five years in prison for his involvement in a blockchain and cryptocurrency conference in North Korea. During the conference, Griffith discussed methods of converting North Korean money into cryptocurrency to evade sanctions. Photographs from the event showed him dressed in a North Korean-style uniform, standing in front of a whiteboard with a drawn smiley face and the phrase “No sanctions yay.”
