The Binance crisis and Hamas funds: the end of the myth of unlimited trading

Binance has been on the throne of cryptocurrency trading platforms in recent years. Not only was it the largest trading platform in the world, but it was far ahead of its competitors, as the company recently captured 60% of the market share for instant trading in digital currencies. This percentage decreased to 40% after the American authorities increased pressure on the company since last June.

This week, Binance faced a criminal case before the US Department of Justice, the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), for violating anti-money laundering laws and violating the US penal code.

CEO resignation and settlement
Binance has reached an agreement with the US Department of Justice to end a years-long investigation, which included the payment of a massive $4.3 billion fine and the resignation of Changpeng Zhao, nicknamed CZ, from his position as CEO of the company. Zhao also pleaded guilty to violating the US Anti-Money Laundering Act, and agreed to pay a criminal fine of $50 million and a civil fine of $150 million. According to sources familiar with the case, Zhao could be sentenced to 10 years in prison, but his actual sentence is likely to be less than that. “I made mistakes and must take responsibility,” Zhao posted on the X platform (Twitter).

In the details of the case
The US Treasury Department said Binance allowed transactions for groups such as Hamas, the Islamic State and Al-Qaeda. A CFTC lawsuit showed that Binance employees were joking about transactions involving Hamas.

The Justice Department said in a statement that Binance allowed financial transactions related to child sexual abuse, drugs, and terrorist financing. Furthermore, Binance did not have any protocols for reporting suspicious transactions and reducing money laundering risks. The employees were fully aware that such an omission would invite criminals to the stand. It also described the company as “reckless,” “negligent,” and “failing” in enforcing the laws.
According to court documents, he said: “Is it so hard to launder drug money these days? Come to Binance, we have a cake for you.” This was a Binance ad featuring Zhao himself!

United States borders
Although Binance is not an American company, this is not the first time that American judicial authorities have applied American law to a platform for trading cryptocurrencies from outside the United States. The same thing happened with the notorious FTX platform. But no company embodies the myth of “borderless” trading more than Binance. For a long time no one seemed to know where it was located, the idea of ​​a headquarters being at odds with the entire identity of Binance. An identity built on the same principle as cryptocurrencies: “decentralized cash”.

But Binance and other trading platforms wanted to enter the US market. To do this, it created another platform, a little sister called Binance US, which also complies with US laws and regulatory papers. But many Americans wanted to use the basic platform, and Binance allowed them to do so because they were non-Americans, and this was an entry point into the investigation that developed into money laundering and sanctions violations.
For his part, Zhao, the former CEO of Binance, who resides in the United Arab Emirates, asked Judge Tessa Gorman in the Seattle Federal Court to allow him to return to his country before he is sentenced next December 14. Zhao said in his application that he wants to return to the UAE to spend time with his family and take care of his health. “I am prepared to return to the United States at any time required by the court, I am committed to complying with US law and cooperating with US authorities, and I do not intend to renounce Canadian citizenship,” Zhao wrote in his application.

Is Binance safe today?
More than $1 billion in funds exited Binance the day after Zhao resigned As stated on the site itself. But the company has more than $65 billion in assets on the platform, which means Binance is likely strong enough to withstand a sudden rush of investors away from the platform. While withdrawals are on the rise, what is happening has not yet been classified as a “mass exodus” of funds from the platform. “Paying a $4.3 billion fine sounds painful, but it is not catastrophic for Binance,” said Yesha Yadav, a law professor at Vanderbilt University.
For its part, Binance said in a statement last Tuesday: “Although Binance is not perfect, it has sought to protect user assets since its early days as a startup and has made tremendous efforts to invest in security.” This is true. Compared to FTX, whose CEO Sam Pinkman-Fried plundered investors’ money on his platform, Binance’s “crime” appears to be closely linked to the ongoing war on Gaza and Hamas’s benefit from transfers on the platform.

Finally, it remains to clarify that trading platforms are for trading, and that using them as a wallet for digital currencies may expose these assets to risk. There are several safer ways to store digital currencies than leaving them on exchanges. In the world of crypto, what you do not know may always put you in danger.