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Crypto investors cheer talk of Binance criminal probe resolution
Binance founder and CEO Zhao Changpeng will admit violating US laws as part of a deal to resolve a US probe into illicit finance breaches, according to a source familiar with matter.
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Zhao Changpeng, founder and chief executive officer of Binance speaks during an event in Athens, Greece, November 25, 2022. (Reuters/COSTAS BALTAS)
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rypto investors have welcomed the prospect of a resolution of a long-running US criminal investigation into Binance, reckoning any deal that allows the major exchange to continue operating would remove a nagging risk to the wider market.
The US Justice Department (DOJ) is seeking over $4 billion from Binance as part of a proposed resolution of its probe, Bloomberg reported on Monday, citing people familiar with the discussions.
A source familiar with the investigation told Reuters the investigation was nearing its conclusion, without elaborating. An announcement on the resolution may come as soon as the end of this month, Bloomberg reported.
Bitcoin, the top crypto and a barometer for wider sentiment, was unmoved by the news and was on Tuesday trading down about 2.6 percent. Binance's in-house token BNB, the fourth-biggest digital coin, climbed 4.6 percent on Tuesday, adding to gains of as much as 6 percent a day earlier.
The market reaction reflects an expectation that a $4 billion payment would be manageable for Binance, four crypto investors and market participants said. Such a settlement would allow Binance to continue to operate, sparing the market a sell-off sparked by any chaotic unwinding, two of the people said.
"We see this news as a positive development," said Anatoly Crachilov, chief executive of London-based Nickel Digital Asset Management, a client of Binance.
A settlement of around $4 billion is "something that potentially Binance can handle," Crachilov said, citing publicly available information on its trading volumes and commissions as evidence that it has been "generating billions."
The exact extent of Binance's cash reserves are unknown. As a private company, it does not disclose basic financial information such as revenue and profit. It has said it is profitable and debt-free.
Binance and the DOJ did not immediately respond to requests for comment.
The DOJ has been investigating Binance and its billionaire CEO Zhao Changpeng since at least 2018 over potential charges including money laundering conspiracy and criminal sanctions violations, Reuters reported last year.
On Tuesday, it is reported that Zhao will admit violating US laws as part of a deal to resolve a US probe into illicit finance breaches, according to a source familiar with matter.
The deal between a number of US agencies and the world's largest crypto exchange will also involve charges against Binance's former compliance chief Samuel Lim, the source said.
The deal will include penalties on the firm of over $4 billion, including $3.4 billion from US Treasury's Financial Crimes Enforcement Network and another $968 million from the Office of Foreign Assets Control, another source familiar with the matter said.
Despite a falling market share this year, Binance has long dominated crypto. Last month it controlled around a third of crypto spot and half of derivatives trading, according to CCData.
Its status has for years left investors wary of risks to the wider market from a string of regulatory and legal headaches facing Binance.
Bitcoin fell as much as 6%, for example, after Binance and Zhao were sued by the U.S. Securities and Exchange Commission in June for allegedly evading U.S. federal securities laws. Binance has denied the SEC's allegations.
Any resolution of the DOJ probe would remove the risk to the crypto market of Binance's sudden collapse, said Sui Chung, CEO of crypto index provider CF Benchmarks.
"Binance disappearing overnight remains a potential systemic risk to the crypto market," Chung said. "But if there is a settlement, that won't be the case ... Any changes to Binance would be orderly."
Other investors cited the personal wealth of Zhao as being sufficient to cover any settlement with the DOJ.
"This can easily be swallowed by CZ himself," said Samed Bouaynaya of London-based Altana Digital Assets Fund.
