By Kelechi Deca
At a time cryptocurrency is breaking the seams of the financial dams, the world’s largest cryptocurrency exchange, Binance is battling for its soul. The founder of Binance, Changpeng Zhao, is facing 36 months in prison after pleading guilty to violating laws against money laundering in the United States.
Zhao, who is expected to be sentenced on 30 April in Seattle, stepped down as Binance CEO last November, when he and the exchange admitted to the violations, and the firm agreed to a penalty of US$4.3-billion. Zhao, commonly known as CZ who founded Binance in 2017, also agreed to pay $50-million and cease involvement with Binance. The penalty included a $1.8-billion criminal fine and restitution of $2.5-billion.
US authorities said Binance failed to report more than 100 000 suspicious transactions with designated terrorist groups including Hamas, al-Qaeda and the Islamic State of Iraq and Syria, or Isis. Prosecutors said Binance’s platform also supported the sale of child sexual abuse materials and was a recipient of a large portion of ransomware proceeds.
Zhao, commonly known as CZ, agreed to pay $50-million and cease involvement with Binance, which he founded in 2017. The company quickly replaced Mr. Zhao with Richard Teng, a former Singaporean regulator, and continued to operate worldwide, but with a smaller staff after it laid off 3,000 of its nearly 8,000 employees last year.
In Nigeria, the government has been investigating money laundering and terrorism financing transactions allegedly perpetrated on its currency exchange platform. This led to a clampdown on the platform. In an effort to mediate, and engage the Nigerian authorities, two top executives traveled to Nigeria where they were promptly arrested since February this year.
Nadeem Anjarwalla, one of them reportedly escaped from detention after begging security officials to allow him observe his prayers. That embarrassing escape exacerbated the issue leading to an international manhunt for him and his re-arrest in Kenya two days ago. It is expected that he would be flown to Nigeria upon the approval of an extradition request by Interpol in conjunction with the Economic and Financial Crimes Commission (EFCC).
Yesterday, a Federal High Court, Abuja adjourned till May 17, to rule on the bail application by Tigran Gambaryan, the second executive of the company who is facing charges of money laundering to the tune of $35,400,000.
It could be recalled that Binance had in an April 3 statement working hard to downplay the effect of the incident, denied that Mr. Gambaryan had any “decision-making power” in the company and said he should not be “held responsible while current discussions are ongoing between Binance and Nigerian government officials.”
Interestingly, Mr. Gambaryan’s arrest comes against the backdrop of other troubling eruptions for Binance in recent times. The company is trying to rebuild after it agreed to pay $4.3 billion in penalties in the United States in 2023 for violating economic sanctions against Syria, Cuba and Iran while allowing criminal activity to flourish on its platform.
In South Africa, it came as a shock that Binance is missing from the list of 75 licensed crypto asses service providers (CASPs) from over 374 applicants. The list, released Monday, features well-established global exchanges like Luno and VALR while Binance was conspicuously missing.
South Africa’s Financial Sector Conduct Authority (FSCA) was quoted as saying that the licensing process goes beyond simply legitimizing crypto businesses. It has a two-fold objective: protecting South African investors from the inherent risks of the volatile crypto market and preventing illegal activities like money laundering and terrorist financing through increased oversight. A statement analysts say was a subtle referral to what is happening at Binance at the moment.