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Binance CEO steps down; crypto platform hit with record $4.3 billion in damages, Grayscale met with SEC to discuss spot Bitcoin ETF details, & more.

Nov 22, 2023

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Binance CEO steps down; crypto platform hit with record $4.3 billion in damages

The CEO of Binance, the world’s largest cryptocurrency exchange, will step down after the company pleaded guilty Tuesday to violations of the Bank Secrecy Act, an anti-money laundering law, among other charges.
The company will pay more than $4.3 billion to settle the charges, the largest penalty in the history of the Treasury Department.
In prepared remarks, Treasury Secretary Janet Yellen said Binance was guilty of “consistent and egregious violations of U.S. anti-money laundering and sanctions laws.”
The Justice Department said in a news release that Changpeng Zhao also pleaded guilty to failing to maintain an effective anti-money laundering program and would step down as chief executive.
Zhao also agreed to a $50 million fine as part of the settlement.
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now it is paying one of the largest corporate penalties in U.S. history,” Attorney General Merrick B. Garland said in the news release.

Financial exchanges in the U.S., including those that specialize in cryptocurrency, are required to follow strict “know your customer” laws to identify their users. In a statement Tuesday, the Treasury Department said that Binance “willfully failed to report” more than 100,000 suspicious transactions from a host of sanctioned groups, including Hamas’ military arm, Qassam Brigades, Al Qaeda, the Islamic State terrorist group, a litany of criminal ransomware hackers and users in countries facing U.S. sanctions, including North Korea and Iran.

In 2019, in response to U.S. regulations, Binance created an offshoot company to serve American customers, Binance.us, while keeping its original platform for the rest of the world. But according to the Justice Department, the company still allowed a “substantial number of US customers” who were allowed to keep using the less regulated company.
The settlement adds to what has been a lengthy and brutal stretch for the crypto world that has seen the collapse of many major exchanges. Still, the price of Bitcoin, the largest cryptocurrency, has risen in the past year. It traded Tuesday at around $37,000.
The guilty pleas come less than a month after Zhao's biggest crypto rival, Sam Bankman-Fried, was found guilty of fraud. The two had at one time arguably been the faces of crypto and almost merged operations late last year when Bankman-Fried’s FTX was on the verge of collapse.

The announcement also comes on the heels of another major federal enforcement action against a cryptocurrency exchange. On Monday, the Securities and Exchange Commission charged U.S.-based Kraken with illegally failing to register its services with the agency, as required by securities law.
In an emailed statement to NBC News, a Kraken spokesperson said, “We disagree with the SEC’s complaint against Kraken, stand firm in our view that we do not list securities and plan to vigorously defend our position.”

Full Article

Grayscale met with SEC to discuss spot Bitcoin ETF details

Executives from crypto asset manager Grayscale have met with the Securities and Exchange Commission to discuss details of its flagship Bitcoin trust, which the firm wants to convert to a spot Bitcoin exchange-traded fund (ETF).
A Nov. 20 SEC memo disclosed that Grayscale CEO Michael Sonnenshein, legal chief Craig Salm, ETF head Dave LaValle and four other executives, along with five Davis Polk law firm representatives, met with the SEC’s division of trading and markets.
The memo said discussions “concerned NYSE Arca, Inc.’s proposed rule change to list and trade shares of the Grayscale Bitcoin Trust (BTC) under NYSE Arca Rule 8.201-E.”
Grayscale detailed that it had entered a transfer agency and service agreement with BNY Mellon, according to a filing shared by Bloomberg ETF analyst James Seyffart.
The bank will act as the agent for its Grayscale Bitcoin Trust (GBTC), facilitating the issuance and redemption of shares and maintaining shareholder accounts.
In a Nov. 21 X (formerly Twitter) post, Seyffart observed that the trading and markets division is in charge of approving or denying Form 19b-4s — used to inform the SEC of a proposed rule change by a self-regulatory organization.

“That doesn’t indicate any issues with conversion to ETF,” he said.
Grayscale has a real shot of dominating this ETF category if it can “uplist GBTC to NYSE Arca on the same day other issuers launch spot BTC ETFs” and make a concerted effort to compete on fees, Geraci added.

The firm is among other major asset managers, including BlackRock and Fidelity, seeking SEC approval for spot Bitcoin ETFs.
Seyffart maintained that “things are continuing to move forward,” and his odds of approval — a 90% likelihood that an ETF will be approved on or before Jan. 10, 2024 — remained the same.

Full Article

'No Reason' for SEC to Deny Bitcoin ETF, Says Hester Peirce

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