The US Justice Department is seeking more than $4 billion from Binance Holdings Ltd. as part of a proposed resolution of a years-long investigation into the world’s largest cryptocurrency exchange.
Negotiations between the Justice Department and Binance include the possibility that its founder Changpeng Zhao would face criminal charges in the US under an agreement to resolve the probe into alleged money laundering, bank fraud and sanctions violations, according to people familiar with the discussions.
Zhao, also known as “CZ,” is residing in the United Arab Emirates, which doesn’t have an extradition treaty with the US, but that doesn’t prevent him from coming voluntarily.
Binance didn’t respond to multiple emails and phone calls seeking comment. The Justice Department declined to comment.
An announcement could come as soon as the end of the month, though the situation remains fluid, according to the people, who asked not to be named discussing a confidential matter.
The BNB cryptocurrency, a token native to Binance and the BNB Chain blockchain that was created by the exchange, rose as much as 8.5% to $266.42 after Bloomberg reported the negotiations.
“A settlement with a monitoring provision in place could be a compromise that protects investors and allows Binance the option to evolve into a more institutional and compliant future direction,” said Matt Walsh, founding partner at crypto venture firm Castle Island Ventures.
The exact timing and structure of the proposed resolution and specific charges aren’t clear. However, Binance would likely be expected to pay more than $4 billion, which would be one of the largest-ever penalties in a criminal cryptocurrency case.
The investigation is being led by the criminal division’s money laundering and asset recovery section, along with the national security division and the US attorney’s office in Seattle.
Strike Balance
The agreement seeks to strike a balance that would allow Binance to continue operating, rather than risk a collapse that could cause negative fallout for markets and crypto holders, said three of the people.
Binance has sought to minimize its exposure in any settlement, including pushing for a deferred prosecution agreement, another person said.
If Binance and the DOJ agree on a deferred-prosecution-agreement, the Justice Department would file a criminal complaint against the company. The US would not go forward with a prosecution as long as the company meets prescribed conditions, which usually include paying a substantial penalty and agreeing to a detailed statement of facts outlining its wrongdoing. A process would be set up to monitor the company’s compliance.
With respect to possible sanctions violations, the Justice Department has been investigating Binance for allegedly aiding in the evasion of US sanctions against Iran and Russia, one of the people said. Binance has also been under scrutiny for whether it allowed transactions that helped finance Hamas.