CZ faced $4.4B penalty over terror claims

Binance founder Changpeng Zhao, alias CZ, claims he was pressured to “bribe” one of the plaintiffs in a case against the exchange or they would tell news publications to write false reports linking it to terrorist groups. The allegations come as legal complaints against Binance tied to the October 2023 Hamas attacks pile up.

CZ, who stepped down as Binance’s chief executive in 2023, said in a post on X Thursday that he had been threatened with fabricated stories if he refused to pay a massive sum.

“One threatened that I must pay them $4.4 billion USD (yes, billion) or else, they would have the media write about (fake stories of) ‘Binance helped terrorists,’ etc.,” CZ wrote. He suggested such demands were part of opportunistic lawsuits brought against him and the company after last year’s plea deal with US authorities.

Judge rules CZ not properly served

A US federal judge ruled in late September that Zhao had not been properly served in a civil case filed by American plaintiffs and relatives of victims of the 2023 Hamas assault on Israel. 

That attack left more than 1,200 people dead and over 200 taken hostage, which Israel’s military retaliated against by invading Gaza, causing deaths of tens of thousands till date.

More than 40 plaintiffs are involved in the lawsuit, which seeks to hold Binance and CZ liable for allegedly facilitating transactions that funded Hamas and Palestinian Islamic Jihad (PIJ). 

Lawyers representing the families attempted to serve Zhao electronically through email and social media, citing his residence in the United Arab Emirates and Binance’s lack of a permanent headquarters.

The Washington, DC federal court, however, rejected those attempts as it found that proper service requirements were not met. That ruling delays Zhao’s direct exposure to the terror-financing claims, although Binance is still a named defendant.

“We always choose to fight for justice! Grateful and glad to see this recent decision,” CZ said on X in response to the dismissal of claims against him personally.

Binance’s compliance failures led to legal charges

In February 2019, Binance’s then-chief compliance officer, Samuel Lim, admitted in internal communications that the platform was being used to send money to Hamas, Cryptopolitan reported. He told a colleague that terrorist operatives transferred “small sums” through the platform.

“Hamas could barely buy an AK-47 with 600 bucks,” the colleague responded, according to evidence cited in a lawsuit filed by the US Commodity Futures Trading Commission (CFTC).

The US Treasury Department explicitly said Binance enabled illicit actors to move funds with little resistance. In a statement announcing penalties against the exchange in late 2023, the Treasury named Hamas, Al Qaeda, Palestinian Islamic Jihad, and the Islamic State of Iraq and Syria as terrorist groups that received money through Binance.

“Binance enabled several illicit actors to transact freely on the platform,” the Treasury said at the time.

A Manhattan federal court rejected the company’s attempt to have the case dismissed early this year, allowing allegations that Binance knowingly processed transactions for Hamas and PIJ to proceed.

US Attorney General Merrick Garland pointed fingers directly at Zhao for failing to enforce proper controls. 

“Zhao willfully violated federal law that requires financial institutions to guard against money laundering and terrorist financing,” Garland said during a press briefing.

CZ’s life beyond prison

Binance agreed to pay $4.3 billion in penalties as part of a settlement in November 2023 with the Department of Justice. Zhao personally pleaded guilty to failing to effectively enforce anti-money-laundering (AML) programs at the exchange.

In April 2024, a federal judge sentenced him to four months in prison, and he was fined $50 million personally. CZ was reportedly barred from serving as Binance’s chief executive as part of the plea deal.

He was released in late September 2024 after serving his sentence. During his time in prison, Zhao’s estimated personal fortune grew beyond $60 billion, making him the wealthiest inmate in US history.

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