Trump Pardons Binance Founder
"Biden's war on crypto is over," the White House tells the Wall Street Journal.
Changpeng "CZ" Zhao, founder of Binance, one of the largest cryptocurrency exchanges in the world, has received a presidential pardon on Wednesday, the Wall Street Journal reports.
In 2023, CZ plead guilty to willfully failing to maintain an effective anti-money laundering (AML) program in violation of the Bank Secrecy Act (BSA) while operating a money transmitting business. At the same time, Binance Holdings LTD plead guilty to AML violations, unlicensed money transmitting, and sanctions violations in what the Department of Justice described as the "largest corporate resolution to include criminal charges for an executive."
In consequence, CZ was forced to step down as Binance CEO and sentenced to four months in federal prison (significantly less than the three years prosecutors had initially suggested), while Binance Holdings agreed to pay a $4.3 Billion fine and was placed under a monitorship by US authorities.
L0la L33tz
War Is Over! (If Trump Wants It)
White House press secretary Karoline Leavitt told the Wall Street Journal that Trump had “exercised his constitutional authority by issuing a pardon for Mr. Zhao, who was prosecuted by the Biden Administration in their war on cryptocurrency,” adding that “the Biden Administration’s war on crypto is over.”
But Keonne Rodriguez and William Hill, the developers of the non-custodial bitcoin privacy wallet Samourai Wallet, are awaiting their sentencing for conspiracy to operate an unlicensed money transmitting business on November 6th. Tornado Cash developer Roman Storm continues to fight the same conviction for building the Ethereum privacy tool, while simultaneously attempting to fight off a potential retrial on the mistried charges on conspiracy to violate sanctions and conspiracy to facilitate money laundering.
As opposed to Samourai Wallet and Tornado Cash, Binance Holding operated a centralized, custodial exchange under its international entity binance.com, which allowed users to open accounts with no more than an email address. As crypto-critic Molly White explains, US users were officially excluded from signing up for such "Level 1 accounts," but Binance allegedly did not do much to verify that users were not actually located in the US. In 2019, Binance launched Binance US dedicated to US users, and by 2022, Level 1 accounts were shut down globally.
According to the Wall Street Journal, CZ's pardon may now pave the way for binance.com to return to the US, and potentially cut short Binance US' monitorship.
In response to CZ's pardon, Senator Elizabeth Warren is arguing that upcoming market structure legislation, which is currently pitted in strong favor of developer protections, must "stop this kind of corruption." Market structure talks have stalled since a leaked Democrat proposal laid out that the other side of the isle would like to see non-custodial developers regulated as "digital asset intermediaries" subject to the BSA and sanction laws.
According to Eleanor Terrett of Crypto in America, Republicans agree that "the legislation should be strong on AML/BSA and illicit finance, with the biggest concern being how to define DeFi and, by extension, how to regulate it." Notably, Republicans are said to also agree to "focus regulation on intermediaries, not protocols" – the only question being what intermediaries exactly Republicans are talking about, as non-custodial services are not understood to have intermediaries under the current legal framework, which classifies a financial intermediary as an entity which holds control over funds.
At the same time, the US Treasury has been seeking comments on implementing digital identities to combat illicit finance in non-custodial services, while the White House has asked Congress to consider applying the BSA to DeFi.
L0la L33tz
How Many Tokens, Mr. President?
As the Wall Street Journal reports, "Binance first reached out to allies of Trump last year offering to strike a business deal with the family as part of a plan to return the company to the U.S," adding that "Representatives of the Trump family have held talks to take a financial stake in the U.S. arm of Binance."
"Binance has been one of the main drivers of the growth of World Liberty’s dollar-pegged cryptocurrency, called USD1. It delivered World Liberty’s first big break this spring when it accepted a $2 billion investment from an outside investor paid in USD1. Binance has also incentivized trading in USD1 across platforms it controls," the Journal reports.
Earlier this year, Senator Warren had sent an open letter to Deputy Attorney General Todd Blanche, requesting information on reports that the Trump administration was considering a pardon for CZ.
"Just weeks ago, Binance, Emirati firm MGX, and World Liberty Financial (WLF)—a cryptocurrency company financially linked to President Trump and his family—announced a $2 billion deal involving USD1, WLF’s stablecoin," the Senator wrote. "The Trump and Witkoff families stand to personally pocket millions of dollars as a result of the deal involving Binance."
According to the New York Times, CZ's pardon was spearheaded by Teresa Goody Guillén, a former SEC lawyer who represents both Trump's World Liberty Financial as well as its co-founder and son of long-time Trump ally Steve Witkoff, Zach Witkoff.
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