Columbia Business School Adjunct Professor Austin Campbell marked the release of Binance co-founder Changpeng Zhao (CZ) from prison in the U.S. on Sept. 27 with a thread on X discussing the prevalence of fiat currencies in money laundering compared to crypto.
CZ, who also served as CEO of Binance until November, pleaded guilty to violating the Bank Secrecy Act by not ensuring that the exchange had sufficient anti-money laundering (AML) controls in place when the platform launched. The crypto mogul subsequently served four months in prison. His guilty plea and his stepping down from the position of CEO came as part of a resolution with the U.S. government. At that time, Binance also agreed to pay $4.3 billion in penalties, while CZ paid an additional $50 million fine.
Campbell, who previously worked as the chief risk officer for Paxos, said in a Sept. 28 thread on X that Binance’s compliance issues between 2018 and 2021 were “not totally surprising” to him given the size of the exchange; Binance is the largest crypto exchange in the world by daily trading volume. Campbell said any financial institution of that size naturally attracts criminals who attempt to “seek out the weak points to exploit them.” Campbell pointed to Goldman Sachs, Standard Chartered, and multiple other banks that paid fines of over $1 billion for compliance failures during the 2018 to 2021 time period.
However, Campbell said the difference between the compliance failures at the banks and those at Binance is that no bank CEOs have been sent to prison. “Instead, politicians scapegoat crypto because it is visible,” while money laundering and other scandals at traditional banks take place “with very little commentary or consequences,” Campbell said.
“This brings me back to @cz_binance,” Campbell said. “Binance paid a massive penalty and CZ himself went to jail in America for doing this, so let me ask the single most pertinent question I have on my mind: Why is it criminal for Binance to launder money but not for banks to launder money?”
Campbell concluded that either politicians are holding CZ, and crypto in general, to a double standard, or U.S. politicians do not actually understand how to address the larger issue of money laundering in the traditional financial system.
Experts such as Jane Khodarkovsky, a former Human Trafficking Finance Specialist for the U.S. government, and J.W. Verret, a professor at George Mason University’s law school, have stated that crypto is far from the ideal tool for money laundering due to the traceability and immutability of blockchain technology.
