US Seeks More Than $4B from Binance to End Criminal Case
bloomberg.comI know this is how the US operates, still it's weird to trade cash for criminal allegations. Especially when Binance has been so vilified.
I'm not defending Binance, rather, it feels like the SEC rhetoric went past the point where a fine is appropriate.
Unless they are only proposing it so they can't be accused of not giving them the same treatment that everyone else gets.
It seems like the deal would be more like probation where Binance would remain monitored after paying the fine:
"If Binance and the DOJ agree on a deferred-prosecution-agreement, the Justice Department would file a criminal complaint against the company. The US would not go forward with a prosecution as long as the company meets prescribed conditions, which usually include paying a substantial penalty and agreeing to a detailed statement of facts outlining its wrongdoing. A process would be set up to monitor the company’s compliance."
Also there might be personal criminal charges against CZ:
"Negotiations between the Justice Department and Binance include the possibility that its founder Changpeng Zhao would face criminal charges in the US under an agreement to resolve the probe into alleged money laundering, bank fraud and sanctions violations, according to people familiar with the discussions.
"Zhao, also known as “CZ,” is residing in the United Arab Emirates, which doesn’t have an extradition treaty with the US, but that doesn’t prevent him from coming voluntarily."
LOL at the "coming voluntarily" part though...
it's oh UEA you want protection of your oil tanker traffic from Iran missile hits, guess what let's trade....
Residing in the UAE also wouldn't prevent extraordinary rendition should it come to that...
No need to go that far. The lack of an extradition treaty doesn’t preclude extradition. Instead of having a formalized process in place it would have to be done case by case. This is a common misconception about extradition treaties in general.
And sometimes you’re safe despite the existence of an extradition treaty. France has a bunch of extradition treaties but they’ll only let them be used against non-citizens.
A lot of countries will only really extradite non-citizens, especially the more powerful they are.
Deportation often amounts to a facto extradition.
Just say kidnapping. It's not like it's North America's first time.
> I know this is how the US operates, still it's weird to trade cash for criminal allegations.
It's not just the US. Spain is accusing Shakira of financial fraud (spending more than 183 days over a year from 2012 to 2014 in Spain --for she had a spanish lover--, without paying her taxes in Spain) and she had to pay something like 16 millions plus six months in jail but they recently settled on an additional 8 millions or something and no jail time.
I mean: it's not exactly the same but they still traded cash for part of the sentence.
P.S: Spain is also apparently now going after her for year 2018.
Lets say this goes to trial and Binance is convicted. What will the sentence be? A fine. Allowing them to pay now without the trial basically is like a plea deal (or pleading guilty for a reduced sentence). Presumably this is less than the DoJ thinks the fine+court costs would be if they went to trial.
> I know this is how the US operates, still it's weird to trade cash for criminal allegations.
I would imagine that the US is not unique in either (1) making corporations liable for crime, or (2) having the principal sanction against the corporation itself for any crime be either monetary or a combination of monetary sanction and injunction or similar behavioral controls.
You can't imprison or kill [1] a company.
You can impose civil or criminal penalties on the directors, but the shareholders are also (perhaps rightly) punished when you impose fines.
A government can also seize a company's assets and redistribute them to recover costs, but in doing so you often dismantle the value.
[1] (At least not in the same way you can impose capital punishment on a human.)
But it really seems more like the US doesn't care about stopping the criminal behaviour.
If they did care, then paying (some amount) to get off scott free wouldn't be an option.
The current approach of allowing payola (like this) just encourages bad actors.
Feels like extortion.
The Mafia's bigger brother.
I'd be much more concerned about what this offer indicates regarding the new goodies that the shadow side of the US government has leveraged out of Binance.
In the long run, I'd wager the US government will be getting information and services worth a good deal more than USD4Billion out of Binance and ancillary organizations.
Still, if you can make as much money as Binance has allegedly been making, and sure, sell out a few of your customers, but now you can keep all that money free and clear legally? That's a pretty good trade assuming you're not some privacy nut or anything.
As a bonus, the shadow side of the US government will probably be pretty keen on protecting you from any of your less savory customers. Just so they can keep the whole thing rolling as long as possible.
This could be a good outcome for Binance.
Wow, I was expecting about half that. I think this would be the second largest DPA ever. BNP Paribas paid $9 billion, Airbus paid $3.9 billion, Wells Fargo $3 billion, ...
I wonder if the SEC/CFTC stuff will be resolved too. That's the deal BitMEX got but this case is way more substantial than just not registering as a money transmitter.
Maybe it's an opening bid that could be negotiated down to 50%. Half kidding.
Or Binance could pay with BUSD stablecoins.
So, in the USA, you can do wrongs and then buy your way out of it, such that doing wrong and the resulting fines are just a cost of doing business however you see fit?
Yes, Robert Smith cured his issue by simply reversing the tax deduction for charitable contributions
Just find something that can be rationalized as value and the US will play along
If you cant: straight to jail, stay there till the trial or take a horrible plea deal that ensures your incarceration but for theoretically less time than losing at trial
After a certain threshold, financial crime is rebranded as "lobbying" and is rewarded instead of punished.
I feel you're going to have to do a bit more work to explain why this lobbying -> reward, vs. crime -> financial penalty, analogy makes sense.
Financial crime can't exist truly hidden in the modern world. Someone always know about it happening. So bribing those in the know is an integral part of the financial crime. And at certain scale bribes get to be renamed as lobbying, while being in essence the same bribes. Bribes are illegal, but lobbying is not, that's what the reward is. Corporation get to legalize their ill gotten money and have no problems with the law.
You don't want to pay capital gains taxes, so you lobby that it is legal to separate obviously unified entity into on-shore bankrupt one, and off-shore profitable one in Ireland or whatever, bribed politicians make it a law and suddenly no taxes are required. You have a chicken farm for which you don't want to pay for extremely expensive utilization of the ill and dead birds, so you lobby to reduce some restrictions written in law and voila, now you can dump your dead birds at a common garbage dump. These are just some illustrative examples.
But they haven't legalised their behavior... if they were to continue doing it, the fine and punishment goes up - it doesn't become a cost-of-business you can just eat going forward.
Also CZ has just stepped down and will be getting legally charged now.
> you can do wrongs and then buy your way out of it
Did you miss the part where they're still wanting to criminally charge Zhao?
I don't know why you're being downvoted, because the answer is mostly yes.
If you're rich enough you can even buy laws via "lobbying". Some politician voted in by the people tries to regulate you? Send in the lobbyists to introduce some "reasonable exceptions" into the law text.
Hell if you're rich enough you get to enforce US laws in foreign nations. Reading the US trade office reports is seriously disgusting to me. "Stakeholders" this, "stakeholders" that.
Sounds like freedom to me :D
Everything continues to be legal for a fee’- and then we wonder the types of people we get
4 billion and continue being an inflation sink (dollar destruction) and the deal with the US gov lets the scam continue.
> the deal with the US gov lets the scam continue
Outside America. Which, like, seems fine.
It's not really though. US people log in to Binance through VPNs and get scammed.
> US people log in to Binance through VPNs and get scammed
Literally the entire point of this case. DoJ seems to want CZ, personally, and for Binance to promise to root out Americans using it through a VPN. If they comply, the company can continue operating in others' markets while using the U.S. financial system.
Why would they even negotiate with the United States? It's like if I ran an online business from the US who happened to have customers in Indonesia and I was breaking Indonesian laws. As long as I never planned on going to Indonesia, why would I care?
Fun fact: many years ago I did run an online business and I did break laws in other countries that I never plan to go to. I never broke US law.
How many countries and financial institutions will do business with someone the US government has put on a watchlist? Now consider that block chains are designed to make it easy for governments to control so even if I’m some guy in Nigeria my calculations for any transaction have to include a discount rate for the reduced number of people who will accept a transaction linked back to a sanctioned organization. Imagine how different the 1920s would have been if every bank, hotel, restaurant, etc. in Miami knew that the dollars you were paying came from a Cuban casino and were subject to criminal charges.
You think he's safe living in Canada if he's found guilty for massive fraud in the US? Or you think China, who has also been cracking down on finance in their own country, is going to protect this nobody whose platform actively works against their financial controls?
> whose platform actively works against their financial controls
Depends on who is going against their financial controls. Obviously if you’re the right person, going around them is permitted. Just don’t be the wrong person going around them!
I mentioned he's Canadian because he's not American. He doesn't live in Canada though and I think it's been a while since he has.
You may want to transit the airspace of the US or one of their allies in the future.
Dollar-denominated bank accounts are a bigger factor for binance.
I know Belarus has ordered at least one plane out of the sky for an arrest, but has the US?
From what I’m reading, nobody ordered a plane out of the sky, but several countries (suddenly) excluded a plane from their sky.
Of course, if you’re flying over a landlocked country, and every neighbour blocks you from their airspace, you don’t have many options. (Not that this quite happened, but looked to be going in that trajectory).
> nobody ordered a plane out of the sky, but several countries (suddenly) excluded a plane from their sky
Suddenly withdrawing permission for a plane to fly through your sky, after it has already taken off and does not have enough fuel to take an alternative route, has the same effect as ordering it out of the sky.
Not exactly - in the Belarus case the plane was in the Belarusian airspace and had to land in Belarus (and then two passengers were arrested). If Belarus had revoked permission before the plane entered its airspace, and it had to land in Ukraine or Poland due to insufficient fuel, nothing would have happened to those passengers.
Who said they didn’t have enough fuel for an alternative route? Their intended destination was Bolivia from Moscow. Can’t do that without a refuel ~midway. The next day they did a refuel in Canary Islands (Spain).
Has it? Who knows? Could it, yes. That is the point OP was making.
That is a good point.
USD is their biggest market.
Ahhh, so I guess this really was just a shakedown after all, like some banana republic despot. Color me stupid for thinking that the US cared about law and order and not about making money through the justice system.
$80 billion in profit and a $4 billion fine! American justice at its finest.
Did they really make $80 billion from the alleged wrongdoings? Or is that just their total profit?
The $80B in profit is a random number the OP through out.
Most likely the exchange is making between $2-$4B in profit a year (With bull markets around $12-$14B a year). However, with such a small team and the team being paid is bUSD, i suspect most of their revenue is pure profit.
Also, Binance executives are tied to Tether ($87B market cap) with around $8-12B in profit per year, and BNB ($39B market cap) $600-$800M per year, makes it one of the most profitable companies in the world.
So although $80B came from no where (And the real number is closer to around $20B a year with a market cap of $110B, $4B is nothing for them.)
Can you explain how you came to that number?