Binance chief Changpeng Zhao will plead guilty to criminal charges and step down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents. The plea arrangement with the government resolves a multi-year investigation into the world’s largest crypto exchange.
Zhao and others are charged with violating the Bank Secrecy Act by failing to implement an effective anti-money laundering program and for willfully violating U.S. economic sanctions “in a deliberate and calculated effort to profit from the U.S. market without implementing controls required by U.S. law,” according to the Justice Department.
Zhao said in a post on X, formerly Twitter, that he had “made mistakes” and “must take responsibility,” adding that Richard Teng, the company’s former global head of regional markets, has been named the new CEO of Binance.
The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission was noticeably absent.
Treasury Secretary Janet Yellen said in a release Tuesday the exchange allowed illicit actors to make more than 100,000 transactions that supported activities like terrorism and illegal narcotics. And it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.
It also allowed transactions associated with terrorist groups like Hamas’s Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda and ISIS, Yellen said in the release, noting Binance “never filed a single suspicious activity report.”
U.S. Attorney General Merrick Garland said in a press conference on Tuesday afternoon that the fine is “one of the largest penalties we have ever obtained.” Yellen said it’s the largest enforcement in the Treasury’s history.
“Using new technology to break the law does not make you a disruptor. It makes you a criminal,” continued Garland.
“Binance prioritized its profits over the safety of the American people,” he added.
The former Binance chief will personally plead guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.
Zhao was scheduled to appear before Judge Brian Tsuchida for a hearing in a Seattle courtroom at 10:00 a.m. Pacific Time (1:00 p.m. ET).
Binance will continue to operate but with new ground rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money laundering standards. The company is required to appoint an independent compliance monitor.
The case against Binance, which was unsealed on Tuesday afternoon, shows that the exchange faces three criminal charges, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, as well as a conspiracy charge.
Binance has agreed to forfeit $2.5 billion to the government, as well as to pay a fine of $1.8 billion.
Binance will continue to operate but with new ground rules. The company is required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money laundering standards. The company will also be required to appoint an independent compliance monitor.
The U.S. DOJ said in its filing Tuesday that Binance “knowingly and willfully” caused the supply of services to Iran, in breach of U.S. sanctions. It follows a report that Binance processed billions’ worth of Iranian transactions.
“Let me be clear: We are also sending a message to the virtual currency industry more broadly, today and for the future,” Yellen wrote in a press brief.
The settlement comes just after FTX founder Sam Bankman-Fried was found guilty of several criminal counts of fraud and conspiracy following just three hours of deliberation by the jury. For a high-profile monthlong trial that involved nearly 20 witnesses and hundreds of exhibits, experts told CNBC they’d never seen such a speedy decision.
Zhao Changpeng, founder and chief executive officer of Binance, speaks at the Blockchain Week Summit in Paris, France, on Wednesday, April 13, 2022.
Benjamin Girette | Bloomberg | Getty Images
CNBC reached out to Zhao for comment but did not immediately hear back. Binance did not respond to several CNBC requests for comment.
The charges follow civil suits brought earlier this year by both the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Binance has been the center of intense regulatory scrutiny over how it operates, with officials in multiple jurisdictions flagging concerns with the company’s gung-ho attitude to launching in certain markets even when it lacks the authority to do so, and allegations of involvement in illicit dealings such as money laundering and securities fraud.
The Securities and Exchange Commission targeted the company with an expansive lawsuit in June, alleging that Binance was running an illegal securities exchange and mishandling customer funds. The SEC hit rival exchange Coinbase with a similar lawsuit shortly after, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.
And just this week, the SEC sued Kraken, claiming that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.
In the 13 charges brought against Binance by the SEC, the agency accused Binance of commingling billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now-bankrupt crypto exchange FTX. SEC Chair Gary Gensler added, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Started by the Chinese-born entrepreneur in 2017, Binance went from a relatively obscure name to a major force in crypto in a matter of weeks. To this day, Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trading volume every year. The exchange took an aggressive approach to growth, rapidly expanding its reach globally often without gaining permission first.
While its holding company is based in the Cayman Islands, Binance doesn’t have a single global headquarters and Zhao has frequently resisted calls to do so, saying he wants the platform to run on a “decentralized” operating model.
In 2021, the U.K.’s Financial Conduct Authority barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its know-your-customer and anti-money laundering controls didn’t meet its requirements.
In the CFTC’s complaint, the regulator alleged that Binance, Zhao, and the company’s ex-chief compliance officer, Samuel Lim, operated an “illegal” exchange, ran a “sham” compliance program, and allegedly violated the Commodity Exchange Act including laws “designed to prevent and detect money laundering and terrorism financing.”
Binance and Zhao filed a motion in July to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s “fishing expedition.”
Of particular concern for the crypto industry are the implications of the agency’s crackdown on crypto for myriad tokens and blockchains — not just the exchanges. The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms — such as Solana’s sol, Cardano’s ada, and Polygon’s matic — are securities that should have been registered with the agency.
— CNBC’s Kevin Breuninger contributed to this report.
China’s EV carmaker Nio jumps 4% after reporting narrower-than-expected losses
Nio’s ET5 stands on display at the Central China International Auto Show on May 25, 2023, in Wuhan, China.
Getty Images | Getty Images News | Getty Images
Nio on Tuesday reported narrowing losses in the third quarter, but gave a revenue forecast below market expectations.
Here’s how Nio did in the third quarter, according to LSEG consensus estimates:
- Revenue: 19.1 billion Chinese yuan ($2.7 billion) versus 19.4 billion yuan expected.
- Loss per share: 2.67 yuan per share loss versus 2.91 yuan loss expected. That was smaller than the 3.7 yuan per share loss recorded in the second quarter of the year.
Revenue rose 47% year-on-year.
Nio shares were around 4% higher in pre-market trade in the U.S., reversing earlier losses that followed the results.
Investors are focusing on the Chinese electric carmaker’s ability to be more disciplined in its spending, as it charts a path to profitability.
Nio CEO William Li reiterated the company’s focus on being more efficient.
“We have identified opportunities to optimize our organization, reduce costs and enhance efficiency,” Li said Tuesday.
Some of those efforts are already bearing fruit. Nio reported a net loss of 4.6 billion yuan in the third quarter, down 24.8% from the second quarter of 2023, but still higher than the same period of 2022.
The company also cut 10% of its workforce last month, citing “fierce competition.”
On top of that, Chinese consumers remain cautious on spending, which could weigh on Nio’s strategy to appeal to the premium segment of the local EV market.
The company said fourth-quarter revenue will be between 16.1 billion yuan and 16.7 billion yuan, representing a year-on-year increase of between 0.1% to 4.0%. Analysts expected a forecast of 22.4 billion yuan in the December quarter.
Nio also anticipates it will deliver between 47,000 and 49,000 vehicles in the fourth quarter — a hike of approximately 17.3% to 22.3% year-on-year.
Nio’s gross margin was 8% in the third quarter, down from 13.3% in the same period last year.
As Nio is yet to turn a profit since it was founded in 2014, the company is trying to show investors that it can balance the need for investments, while also being more disciplined with costs.
Li said on Tuesday that Nio would defer or terminate any projects that won’t bring a financial contribution in the coming three years. He added that the company will make sure that it doesn’t “dilute” investments in core areas like technology and its sales and service network, as it prepares “for the more intense competition in the coming two years.”
As part of this push, Nio on Tuesday announced that it has entered into an agreement to acquire certain manufacturing equipment and assets from Anhui Jianghuai Automobile Group Corp. (JAC) for 3.16 billion yuan. JAC currently manufactures Nio cars.
Li said that bringing manufacturing entirely in house could reduce the costs of such operations by 10%, but that the company would exclude battery manufacturing from being drafted in-house, as the measure would not improve gross margin.
Nio CFO Steven Wei Feng said that the company’s vehicle margin, which was 11% in the third quarter, can rise to 15% in the fourth quarter, helped by lower material and component costs, as well as better manufacturing capacity.
In 2024, the company is targeting a vehicle margin of between 15% and 18%, the CFO said.
Reproductive startup launches test to identify an embryo’s genetic defects before an IVF pregnancy begins
Noor Siddiqui, founder and CEO of Orchid, during the web summit for careers during Day 2 of the 2014 Web Summit in Dublin, Ireland, Nov. 5, 2014.
Stephen McCarthy | Getty Images
Reproductive technology startup Orchid on Tuesday announced a comprehensive new genetic test that may help many prospective parents across the U.S. breathe a little easier.
The company is launching the first commercially available whole genome sequencing report for embryos, designed for couples undergoing in vitro fertilization, which is a type of treatment for people experiencing infertility or who are at risk of passing on genetic problems.
With IVF, after a woman has had around two weeks of daily hormone injections, her mature eggs are extracted and fertilized in a lab, and the viable embryos are later transferred into the uterus.
Orchid said its new test will help couples identify whether their embryos present genetic risks such as birth defects, neurodevelopmental disorders, chromosomal abnormalities, or pediatric and adult-onset cancers that were previously only detectable after birth.
“This is a major advance in the amount of information parents can have,” Noor Siddiqui, Orchid’s founder and CEO, told CNBC in an interview. “The way that you can use that information is really up to you, but it gives a lot more control and confidence into a process that, for all of history, has just been totally left to chance.”
Orchid’s technology sequences more than 99% of an embryo’s genome, while existing tests typically read around .25%, the company said in a release.
IVF is a taxing process that can cost an average of more than $12,000 in the U.S., according to the Institute for Reproductive Health. Success is not guaranteed, and some people go through multiple rounds of IVF before a pregnancy develops.
Orchid’s genetic test will cost couples an additional $2,500 per embryo sequenced, but it does not add any new steps or risks to the IVF process, Siddiqui said. She added that the cost of the report should come down as the company is able to scale up its operations and introduce more automation.
“We want to make this something that’s accessible to everyone,” Siddiqui said.
Beginning Tuesday, Orchid’s technology will be available at IVF clinics in major cities such as Los Angeles, Chicago, Miami and Austin, and Siddiqui said Orchid can be made available at additional clinics at the request of patients.
Couples will receive their report back from Orchid after about three weeks, the company said, and a board-certified genetic counselor will help them understand the results.
Orchid’s whole genome embryo report
Orchid has secured $12 million in funding from investors such as Prometheus Fund and Refactor Capital. Anne Wojcicki, the co-founder and CEO of 23andMe; Dylan Field, the co-founder and CEO of Figma; Fidji Simo, the CEO of Instacart; Brian Armstrong, the co-founder CEO of Coinbase, and others are also backers.
For many hopeful parents, the peace of mind is worth Orchid’s steep price.
Roshan George, a 35-year-old engineer in San Francisco, began the IVF process with his wife, Julie, in the fall.
George said they were feeling some anxiety about having a baby at an older age, and their nerves were amplified after their IVF clinic discovered they are both carriers for nonsyndromic hearing loss, which can result in a partial or total loss of hearing.
George had heard of Orchid through some friends, he said, and the couple decided to sequence all three of their viable embryos with the company. He said getting the embryos tested was very straightforward, and when the results came back, they discovered that two out of the three embryos were healthy.
“We were super relieved right off the bat,” George told CNBC in an interview. “That was very gratifying to hear.”
“Just having some degree of certainty — you’re going to make sure they’re not sick when they’re born and all that sort of stuff — it’s a huge amount of anxiety that’s been lifted off,” George said.
George Church, a professor of genetics at Harvard Medical School, is an investor and an adviser at Orchid. Church developed the first direct genome sequencing method, he said, and Orchid’s technology will give parents the ability to access a hundred times more information about their baby than they could attain previously.
Church said it is “perfectly logical” for parents to care about helping their children, whether it pertains to their genetic health, the quality of their food or whether they get enough sleep and exercise.
He added that people often think that genetic risks don’t apply to them, or that there’s nothing they can do if something is wrong. But with Orchid, Church said parents have the detailed information they need to make informed decisions.
“If you went to Las Vegas with a 97% chance of winning, you would definitely go to Las Vegas,” Church told CNBC in an interview. “But it’s different when you’re talking about quarters as opposed to children.”
Orchid’s primary focus after the launch Tuesday will be on scaling up its technology and making it more accessible, Siddiqui said.
She said Orchid has spent an “enormous amount of effort” identifying the mutations that will cause severe disease during pregnancy or early childhood or result in serious chronic conditions. She wanted to ensure the company is able to provide parents with information that is “super meaningful.”
“I think this has the potential to totally redefine reproduction,” Siddiqui said. “I just think that’s really exciting to be able to make people more confident about one of the most important decisions of their life, and to give them a little bit more control.”
Take-Two shares tumble as Rockstar Games publishes Grand Theft Auto trailer early after leak
Strauss Zelnick, CEO of Take Two Interactive.
Adam Jeffery | CNBC
Shares of video game publisher Take-Two Interactive Software fell 4% in extended trading on Monday after the company released its trailer for the next version of the Grand Theft Auto game, which will come out in 2025. The company had originally planned to put out the trailer hours later, at 6 a.m. ET. on Tuesday, Dec. 5, but a leak caused Take Two to move up its timeline.
The video was originally leaked on X, formerly known as Twitter. After that, Rockstar Games, a subsidiary of Take-Two, published the trailer on YouTube.
Grand Theft Auto VI is likely to impact Take Two shares upon its release. Grand Theft Auto V debuted in 2013, and it’s now the second best-selling video game in history, having sold more than 190 million copies. It’s only behind Microsoft-owned Minecraft, of which over 300 million copies have been sold.
Gamers have been eager for details about the new game for years. Sam Houser, Rockstar’s founder, announced in early November that the trailer would come out in December.
“As the label approaches its 25th anniversary next month, we congratulate Rockstar Games on their constant innovation in the pursuit of the highest quality interactive entertainment,” Take-Two CEO Strauss Zelnick told analysts on a November conference call.
You can watch the new trailer below:
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