Last week, Binance, a cryptocurrency exchange, transferred $3.9 billion worth of Tether (USDT) stablecoins between its wallets, just days before the company agreed to a $4.3 billion settlement with U.S. authorities. The company pleaded guilty to money laundering charges.
There has been speculation about whether Binance will use the transferred funds to pay the substantial criminal penalty imposed as part of the settlement. Most of the money was moved from one Binance cold wallet to another. Cold wallets are used by the company to store the majority of its holdings. The latter wallet is known as a hot wallet, which means that the funds stored there are more readily accessible.
Settlement Concludes Ongoing Scrutiny
Binance CEO Changpeng Zhao also pleaded guilty to charges as part of the agreed deal. In addition to paying $1.8 billion in criminal fines, Binance will forfeit an additional $2.5 billion, with portions going to the CFTC, FinCEN, and OFAC. This brings the total penalty to $4.3 billion, which is similar to the amount transferred between Binance wallets just before the plea deal.
Tether, the issuer of the tokens involved in the transferred funds, has faced controversy over the dollar reserves backing the widely-used USDT token. Tether settled its own investigation in 2021, paying $18.5 million related to the question of whether it held sufficient dollar amounts to back issued USDT tokens 1:1 with cash reserves.
While using its Tether holdings to pay U.S. authorities could further legitimize the stablecoin, Binance has not confirmed if the transfer was related to accumulating funds for the negotiated settlement deal. The company did not respond to requests for comment.
The transactions occurred just before Zhao stepped down as CEO. Binance will now face increased scrutiny of its regulatory compliance and anti-money laundering controls as part of the deal. The settlement brings an end to years-long investigations into the crypto exchange, which dominates trading volumes across the industry.
Featured image from Flickr used under Creative Commons 2.0 license.
