Richard Teng was named CEO at Binance on Tuesday afternoon after founder Changpeng Zhao stepped down as chief executive to plead guilty to failing to maintain an effective anti-money laundering program in violation of the Bank Secrecy Act.
Zhao, who agreed to pay $50 million in fines during Tuesday’s court hearing in Seattle, tweeted afterward that stepping down was “not easy” but was “the right thing to do.”
“I made mistakes, and I must take responsibility,” Zhao wrote. “This is best for our community, for Binance, and for myself.”
Teng joined the company as Singapore CEO in 2021 and has since climbed its ranks, serving most recently as global head of regional markets. Over the previous 30 years, he spent time as the CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, as chief regulatory officer of the Singapore Exchange, and as director of corporate finance in the Monetary Authority of Singapore, according to his LinkedIn profile.
“Binance is no longer a baby. It is time for me to let it walk and run. I know Binance will continue to grow and excel with the deep bench it has,” Zhao tweeted. “[Teng] will navigate the company through its next period of growth. He will ensure Binance delivers on our next phase of security, transparency, compliance, and growth.”
Teng tweeted that his focus will be on regaining user confidence in the financial strength, security and safety of the company; working with regulators on rules that foster both innovation and consumer protections; and working with others to drive the adoption of Web3 — a term used to describe the next iteration of the internet, built using blockchain technology.
“The trust placed on us by our 150 [million] users and thousands of employees is a responsibility that I take seriously and hold dear,” he tweeted. “I have accepted this role so that we can continue to meet and exceed the expectations of stakeholders while achieving our core mission, the freedom of money.”
Tuesday’s settlement, however, will ensure that Teng faces more hurdles in his job than Zhao did. Binance will pay $4.3 billion to the Justice Department, the Treasury Department, the Commodity Futures Trading Commission and the Office of Foreign Assets Control to resolve violations related to the BSA, the International Emergency Economic Powers Act and the exchange’s failure to register as a money transmitting business.
FinCEN, which will receive $3.4 billion of the penalty, has imposed a five-year monitorship of Binance in which the Treasury Department “will retain access to books, records, and systems” of the company.
If Binance fails to live up to the obligations of the settlement, it will be subject to a $150 million suspended penalty, the Treasury Department said.
“From the beginning of its existence, Binance and founder Changpeng Zhao chose growth and personal wealth over following financial regulations aimed at stopping the laundering of criminal cash,” Tessa M. Gorman, acting U.S. Attorney for the Western District of Washington, said in a statement. “Because Changpeng Zhao knowingly operated a financial platform without basic anti-money laundering safeguards, the company caused illegal transactions between U.S. users and users in sanctioned jurisdictions such as Iran, Cuba, Syria, and Russian-occupied regions of Ukraine — transactions for which Binance profited with significant fees.”
Binance failed to file suspicious activity reports with FinCEN on more than 100,000 transactions that went on to fund terrorist organizations, ransomware, child sexual exploitation material, frauds and scams, the Treasury Department said.
As part of the settlement, Binance must exit the U.S. entirely. Binance.US, however, is a registered money services business and is not affected by Binance's exit, an official clarified to CoinDesk.
For his guilty plea, Zhao faces up to 18 months in prison, though prosecutors are considering asking for a stiffer penalty, The New York Times reported. A court filing shows that he paid $175 million personal recognizance bond, and placed $15 million in a separate trust account that he will forfeit if he violates terms of his bail.
A sentencing hearing is scheduled for Feb. 23, 2024.
Despite reassurances from Zhao and Teng, outflows from Binance surpassed $1 billion between Tuesday morning and early Wednesday, according to blockchain analysis firm Nansen.
The exchange has had multiple previous billion-dollar-loss days, including on the day former FTX CEO Sam Bankman-Fried was arrested in the Bahamas following the collapse of his own crypto exchange, and the day Binance was sued by the SEC in June.
Zhao, without mentioning his guilty plea, tweeted that he plans to “take a break” now that he’s not CEO of the world’s largest crypto exchange, and that he will probably “do some passive investing” in several types of tech startups.
“I can’t see myself being a CEO driving a startup again. I am content being an one-shot (lucky) entrepreneur. Should there be listeners, I may be open to being a coach/mentor to a small number of upcoming entrepreneurs, privately. If for nothing else, I can at least tell them what not to do,” he wrote. “On that note, I am proud to point out that in our resolutions with the U.S. agencies they: do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation.”
In response to a request for comment, a Binance spokesperson directed Banking Dive to a blog posted by the company Tuesday:
“While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance. However, when Binance first launched, it did not have compliance controls adequate for the company that it was quickly becoming, and it should have. Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way. Today, Binance takes responsibility for this past chapter. Over the past two years, we have worked hard to restructure our organization and personnel and upgrade our systems. We have new leadership in place with deep compliance experience and impressive backgrounds ranging from top traditional financial institutions and leading tech companies, to law enforcement and major corporate entities. It is through this process that we have become a stronger, safer, and even more secure platform for our users.”
Binance Announcement: Reaching Resolution With U.S. Regulators