All you need to know about the Binance drama that unfolded in the last 24 hours

In the late hours of Tuesday, the global crypto community experienced a massive shakeup. There were reports that Changpeng Zhao (CZ), Co-founder and former CEO of the largest crypto exchange in the world, Binance was planning to step down from his role as part of a $4.3 billion settlement with the United States Department of Justice. 

CZ eventually corroborated this story and dropped a comprehensive statement to address the issue on X (Twitter). 

In the statement, CZ announced his stepping down and replacement. However, the news has generated wide reactions across circles since CZ has been the face of Binance and indeed, the global crypto space for the past seven years.

Below is a timeline of all that has happened in the crypto space in probably the most eventful 24 hours of 2023 in the industry.

CZ’s step-down reports surface 

Around 6 pm WAT on Tuesday, reports from major outlets emerged that Binance’s CZ was stepping down. Technext reported that CZ agreed to step down as the United States Department of Justice (DOJ) prepared to announce that it secured a $4.3 billion settlement with the world’s largest crypto exchange.

Read also: #NollywoodMonth: How TikTok has sustained the golden age of Africa’s largest movie industry

Also, we said Chaopeng Zhao will plead guilty to criminal charges related to violating United States anti-money-laundering laws as part of a broad settlement with the US Department of Justice.

CZ confirms, releases statement

At 9:36 WAT, former CEO of Binance, Changpeng Zhao released a statement which corroborated the speculations on X (Twitter). However, he said he won’t be leaving the space entirely. 

“My current thinking is I will probably do some passive investing, being a minority token/shareholder in startups in areas of blockchain/Web3/DeFi, AI and biotech. I am happy that I will finally have more time to spend looking at DeFi.”

Additionally, CZ said that he likely won’t be a CEO of another startup again, but will be open to being a coach or mentor to a small number of upcoming entrepreneurs, privately. He noted that he will remain a shareholder of Binance and be available in a consulting role if needed.

CZ, who founded the exchange in 2017, is succeeded by Richard Teng, who previously oversaw the exchange’s regional business outside the United States

CZ pleads guilty 

Later on that Tuesday, Changpeng Zhao was released from custody on a $175 million personal recognizance bond. 

He pleaded guilty to violating the Bank Secrecy Act after federal officials alleged he directed Binance to allow United States customers to use the platform without conducting proper know-your-customer or anti-money laundering checks.

According to a court filing, CZ will be posting $15 million held in a trust account by Davis Wright Tremaine (separate from the bond) and agreeing to forfeit funds if he violates the terms of his release. 

Also, a sentencing hearing has been scheduled for February 23, 2024, at 9 am Pacific Time as the former Binance boss finds two guarantors, who will be pledging $250,000 and $100,000 respectively. The terms of Zhao’s release bar him from breaking the law, tampering with witnesses or victims or taking any non-prescribed controlled substances – normal provisions in a bond release. 

Lastly, the order appears to allow Changpeng Zhao to leave the United States, saying he has to return 14 days before sentencing.

Binance on the other hand will pay $4.3 billion in penalties to various federal agencies and allow multiple monitors to oversee its operations through the next five years.

In addition to the DOJ, Binance settled charges with the Financial Crimes Enforcement Network (FinCEN), Office of Foreign Asset Control (OFAC) and Commodity Futures Trading Commission. These organisations are the United States’ money-laundering watchdog, sanctions watchdog, and federal commodities regulator respectively.

Effect on Binance 

According to DefiLlama’s metric dashboard, withdrawal on Binance in less than 24 hours has passed  $566.8 million. However, this scenario cannot be likened to FTX’s.

Binance appears to be sound, at least on the surface. Its latest “proof of reserves” report shows the exchange holds $65 billion worth of crypto assets alone. DefiLlama says it is $68.4 billion. 

Also, Binance appears to be overcollateralized for many of the largest assets on its books, like bitcoin (BTC), ether (ETH), tether (USDT) and others. This means its net balances are more than it owes customers.

In clearer terms, if every customer withdraws all digital assets they own, the exchange would still have balances to spare. Unlike what played out with FTX.

What is next?

Amid ongoing confusion, uncertainty, and rumours around the departure of CZ and the future of Binance, his replacement, the new Binance CEO Richard Teng, took to X (formerly Twitter) to attempt to boost investor confidence.

In his introductory tweet as Binance’s new CEO, Teng stated that “the foundation on which Binance stands today is stronger than ever.”

Teng also said he will focus on three aspects of the business — reinstating investor confidence, collaboration with regulators, and driving Web3 adoption.

Additionally, he said the crypto exchange generates robust revenues and profits despite low platform fees.

Recall that in his exit note, CZ confirmed his plans to remain associated with the crypto exchange as a shareholder, adding, “I will remain available to the team to consult as needed, consistent with the framework set out in our U.S. agency resolutions.”

With this, the future of Binance could be bet on.