- [Narrator] For years, Binance's, founder Changpeng Zhao,
better known as CZ, repeated a promise.
- Binance.com is embracing regulations all around the world.
There's a very strong need for exchange
that want to operate everything properly.
We welcome anyone to look under the hood for our business.
I think we run a very clean business.
- [Narrator] That his global cryptocurrency exchange
would follow the rules and his company grew.
In 2021, its monthly trade volume was greater
than the next four biggest exchanges combined.
But behind the scenes, Binance was dodging regulations
and some naysayers said that the exchange was-
- A walking time bomb.
- [Narrator] Now, CZ has stepped down as CEO
and pleaded guilty to criminal charges in the US.
His company will also plead guilty
and agree to pay fines totaling $4.3 billion.
- Binance became the largest
cryptocurrency exchange in the world.
Now Binance is paying one
of the largest corporate penalties in US history.
- [Narrator] Here's how Binance skirted regulations
to rise to the top
before that same strategy brought it crashing down.
- I think the value system is a key ingredient
that drove us to the success very quickly.
- [Narrator] This is CZ.
Back in 2018, he started the company a year earlier.
Within six months, Binance surpassed older exchanges
to become the largest exchange in the world by trade volume.
That's partly because CZ set
Binance's sites ongoing global early on.
But as it grew, Binance ran into regulatory issues
almost immediately.
First with its original headquarters in China
where the government banned crypto exchanges soon
after Binance was founded.
- So we generally don't like to go up against governments.
So we moved out of China.
We are actually not,
I mean Tokyo right now personally.
- [Narrator] And again after moving to Japan,
which warned the company
against conducting trades without a license.
And after that, Binance stopped
disclosing where it was based.
- They won't say it's meant to break rules,
but basically gave them the edge to serve customers
from so many different parts of the world.
- So Binance doesn't have a bank account,
doesn't have an office.
So we're moving away from the company concept.
We're really just an organization
or a community that's working together.
- [Narrator] But that's also
when Binance's lack of a home base
started to make operations more complicated,
especially in the US.
About a fifth of Binance's users at the time
were based there.
Binance's chief compliance officer at the time
messaged a colleague.
"We are operating as a (beep) unlicensed security exchange
in the USA bro,"
according to an SEC filing.
- US regulators are known for being sort of tough
and a lot of times like the first
to really start looking at something.
And the tendency is that other countries
start following whatever the US does.
- [Narrator] In order to comply with rules,
the company launched Binance US in September of 2019.
It says the plan
was for the site to use Binance's technology and brand,
but operate independently
of the original company and CZ.
But behind the scenes-
- It was pretty clear based on the dialogues
that the intention there was to create a site
that was for the US users only,
but also at the same time allow us users to continue
to tap on the larger website to do the trading
and bring US money in to the exchange.
- Both the SEC and the DOJ started investigating
the company's actions
and sent subpoenas to finance in 2020
and other countries followed suit.
- As one of the largest
industry players in the in the world,
we welcome regulations.
- Despite mounting skepticism,
the company still continued to grow.
At the beginning of 2022,
CZ's net worth was estimated
to briefly jump to nearly $100 billion,
ranking him among CEOs like Mark Zuckerberg
and Warren Buffett.
- He makes it his persona be quite relaxed
and kind of easygoing.
We know though that when he's working and at work,
he is pretty tough.
According to all these US authorities
that brought cases against Binance, in fact,
CZ is extremely driven to make money.
- [Narrator] But in 2023 following months
of cratering crypto prices
and the collapse of FTX and other firms,
things began to fall apart.
In March. The CFTC sued Binance alleging
that the company was continuing
to operate illegally in the US.
In May, the company pulled out of Canada,
its only major market in North America citing
changes in regulation.
Then in June, the SEC filed a lawsuit against CZ
and Binance claiming that CZ had continued
to maintain undisclosed control over Binance US.
More countries began investigations
and the company pulled out of others,
particularly in Europe.
In July, Binance laid off an eighth of its staff
and a number of core executives left the company.
Then in November, Binance planned to pay
the Department of Justice $4.3 billion in fines
and plead guilty to a criminal charge.
CZ pleaded guilty
to violating anti-money laundering requirements,
a deal that may allow the company to continue operating.
However, he will maintain his majority ownership.
- Rather than implement
the basic anti-money laundering safeguards
that his team recommended,
safeguards required by US law,
Binance and its founder operated
as though the rules didn't apply.
- [Narrator] In a statement on X,
he said that he's stepping down as CEO
and will take a break.
He also said that user funds are SAFU.
A Binance term, implying that they are safe.
Richard Tang, Binance's former head of global markets
will step in as CEO.
- As part of the settlement,
Binance will have to comply with several, several rules
and that means you're gonna have
a lot of or much tougher oversight
from US authorities on exchange.
The question now is,
can Binance survive without CZ?
- [Narrator] Binance declined to comment,
but said in a public statement,
"These resolutions acknowledge our company's responsibility
for historical criminal compliance violations
and allow our company to turn the page on a challenging
yet transformative chapter of learning and growth."
It's unclear how the fallout of the charges
for the world's largest crypto exchange
could affect the broader market.