The surprise presidential pardon granted to Changpeng Zhao, founder of Binance and one of the most recognizable figures in the global crypto industry, has reignited debate about financial crime accountability and the politicization of anti-money-laundering enforcement. The news was first released by the Wall Street Journal. Zhao’s release comes less than a year after he served a federal prison sentence following one of the largest corporate money laundering convictions in U.S. history. The case, which centered on systemic failures in Binance’s AML controls, continues to represent one of the most defining compliance breaches in the evolution of the cryptocurrency sector.
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Crypto money laundering failures behind the Binance conviction
When Binance was launched in 2017, it rapidly grew into the world’s leading cryptocurrency exchange by trading volume. Its business model emphasized speed, accessibility, and global reach. However, these same factors soon attracted the attention of regulators. Between 2018 and 2023, U.S. authorities concluded that Binance had facilitated billions of dollars in transactions without implementing effective anti-money-laundering (AML) measures as required under the Bank Secrecy Act (BSA) and related federal statutes.
Prosecutors found that Binance allowed customers worldwide, including those in sanctioned jurisdictions, to trade cryptocurrencies anonymously. This absence of robust Know-Your-Customer (KYC) processes enabled criminals to convert illicit funds into digital assets, effectively laundering proceeds from ransomware, narcotics, and cyber-fraud schemes. The U.S. Department of Justice determined that Binance not only failed to register as a money-transmitting business but also deliberately circumvented internal controls to maintain user growth.
In late 2023, Binance and its founder pleaded guilty to failing to maintain an effective AML program. The company paid an unprecedented fine of USD 4.3 billion, and Zhao personally paid USD 50 million while stepping down as CEO. He was sentenced to four months in prison, an outcome viewed as lenient given the scale of the violations. The DOJ underscored that the exchange had effectively become a gateway for illicit capital movements and that its leadership bore personal responsibility for undermining AML frameworks that protect the global financial system.
The plea agreement also imposed a five-year compliance monitorship on Binance, requiring direct oversight from U.S. authorities. FinCEN and the Office of Foreign Assets Control (OFAC) were assigned to supervise the firm’s adherence to AML and sanctions obligations. This structure, mirroring the toughest resolutions in traditional banking cases, confirmed that crypto firms operating in or touching U.S. markets would henceforth face parity with banks in enforcement expectations.
Political implications of Trump’s intervention
The October 2025 pardon marked an abrupt turn in the trajectory of the case. Former president Donald Trump, recently returned to office and branding himself the “crypto president,” exercised his constitutional power to absolve Zhao of his conviction. The pardon effectively erased the criminal record associated with the money-laundering violations, despite the DOJ’s extensive findings.
Trump’s administration argued that Zhao’s prosecution was part of what it termed a “war on cryptocurrency” by the previous government. The pardon was framed as a gesture toward fostering innovation, yet it reignited controversy across legal and financial communities. Compliance experts and law enforcement officials expressed concern that such a decision undermines years of progress in holding high-profile financial actors accountable for systemic AML failures.
The pardon also sits within a broader trend. Earlier that same year, Trump pardoned the three co-founders of BitMEX, who had pleaded guilty to failing to implement an AML program under the BSA. He also pardoned Ross Ulbricht, creator of the Silk Road dark-web marketplace, whose platform enabled large-scale narcotics and money-laundering transactions before being shut down by the FBI. Observers note that these decisions collectively signal a softening stance toward crypto-related financial crime and a potential rollback of the regulatory discipline built since the late 2010s.
While a presidential pardon removes criminal liability, it does not alter the factual record of wrongdoing. For Binance, the underlying compliance obligations remain intact. The company continues to operate under a U.S. monitorship and remains responsible for reforms to its transaction monitoring, sanctions screening, and customer verification systems. However, the optics of Zhao’s rehabilitation—combined with the administration’s overt pro-crypto messaging—have raised doubts about the future enforcement consistency of AML policy in digital finance.
Systemic failures in Binance’s AML program
The regulatory findings against Binance exposed structural weaknesses that can serve as a cautionary template for all financial institutions. The first and most significant issue was the company’s prioritization of growth over compliance. Binance’s senior leadership created an operational culture that viewed regulatory frameworks as obstacles rather than safeguards. Compliance staff were under-resourced, controls were fragmented, and decision-making authority was concentrated among executives incentivized by trading volumes rather than risk mitigation.
The second issue involved customer onboarding. Binance’s onboarding process permitted users to register using minimal identification data, often accepting unverifiable documents or allowing repeated accounts. This design directly contravened KYC principles enshrined in both the BSA and international AML standards such as those recommended by the Financial Action Task Force (FATF).
Third, Binance’s transaction-monitoring systems were inadequate to flag suspicious activity in real time. Investigations revealed that the exchange processed substantial volumes of transactions linked to sanctioned jurisdictions, including Iran, Russia, and Syria. Some flows were tied to terrorist-financing channels and ransomware groups, including those already designated by OFAC. The system’s deficiencies meant that alerts were either missed, dismissed, or never generated.
A fourth and particularly serious finding was Binance’s deliberate effort to conceal its U.S. customer base. Internal communications indicated that the company sought to “avoid regulatory triggers” by routing transactions through offshore entities, thereby evading registration and oversight. This structure created opacity in the flow of funds and hindered the traceability of customer activity, which is fundamental to AML compliance.
Finally, Binance’s governance failures reflected a lack of accountability at the top. Unlike traditional banks, which operate under board-approved compliance frameworks, Binance’s risk management decisions were centralized under its founder. When Zhao pled guilty, it confirmed that personal culpability in AML governance could extend to founders and executives—a precedent that has far-reaching implications for other crypto-asset service providers (CASPs).
Evolving enforcement and compliance lessons
The Binance case underscores several lessons for AML professionals, regulators, and policymakers. First, AML enforcement in the digital-asset space has entered a phase of maturity. The scale of penalties and the personal criminal liability attached to executives demonstrate that crypto entities are no longer operating in a regulatory vacuum. This shift aligns with the FATF’s continued emphasis on applying a risk-based approach to virtual-asset service providers, ensuring that obligations mirror those of traditional financial intermediaries.
Second, political interference in enforcement carries inherent risks. Pardoning individuals convicted of severe compliance breaches can erode deterrence, foster a perception of regulatory inconsistency, and discourage institutions from investing in robust AML infrastructure. A sustained erosion of credibility may also affect international cooperation, as cross-border investigations depend on mutual trust among financial-intelligence authorities.
Third, the case reveals the growing convergence between AML, sanctions, and cyber-security oversight. Regulators increasingly interpret compliance failures across these domains as interconnected. Weak sanctions screening often implies AML weakness, and both expose entities to national-security risks.
Fourth, compliance programmes must evolve from procedural checklists to proactive, data-driven systems. For digital-asset platforms, this means integrating blockchain analytics, wallet clustering, and behavioural pattern recognition. The Binance episode illustrates how traditional controls alone cannot manage modern risks unless supported by advanced technological monitoring and clear escalation paths.
Finally, the case exemplifies the importance of long-term remediation. Despite the pardon, Binance’s monitorship remains legally binding. The company must demonstrate measurable improvements in AML governance, reporting accuracy, and internal culture. For the compliance community, this reinforces that reputational recovery in the aftermath of a financial-crime case depends not on political relief but on demonstrable institutional reform.
Related Links
- U.S. Department of Justice – Plea agreement with Binance and Changpeng Zhao
- Financial Crimes Enforcement Network (FinCEN) – Consent order and AML monitorship details
- Office of Foreign Assets Control (OFAC) – Enforcement guidelines and sanctions compliance framework
- Financial Action Task Force (FATF) – Virtual Asset Service Provider guidance
- Commodity Futures Trading Commission (CFTC) – Enforcement actions relating to Binance
Other FinCrime Central Articles About Binance AML Failures
- Binance Sees SEC Civil Action Dismissed Amidst Record AML Settlement
- French Authorities Intensify Scrutiny of Binance Over Money Laundering
- Binance founder ‘CZ’ leaves Californian prison, along with his $60 billion fortune
Source: Reuters
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