SEOUL (Reuters) -Naver Financial, a unit of South Korean internet giant Naver, has agreed to acquire Dunamu, an operator of the country’s largest cryptocurrency exchange Upbit, in an all-stock deal valued at 15.13 trillion won ($10.27 billion).
The payment platform said in a regulatory filing on Wednesday that the deal, which is one of the largest in Asia this year, aims to secure future growth based on digital assets.
Naver’s fintech subsidiary plans to issue 2.54 shares for every one share in the operator of Upbit.
South Korea has a booming cryptocurrency market, and the merger would help Naver secure new growth drivers in digital assets and stablecoins, allowing investors to expect growth in its fintech business beyond its existing advertising, commerce and content operations, according to analysts.
“Upbit is the largest crypto exchange in South Korea with about 70% market share according to some reports and is hugely profitable,” said Siya Yang, head of marketing at Hong Kong-headquartered HashKey Group, a digital assets services firm.
“Naver can see synergy in the business as it can divert its own user traffic toward the exchange who provides financial products to mostly the younger generation,” said Yang.
Responding to speculation that Naver could list on the Nasdaq, CEO Choi Soo-yeon said on Thursday the company had no specific plans, adding that if a future listing is considered, it will be guided by the goal of enhancing shareholder value.
Naver shares jumped by more than 7% after news of the acquisition, but were trading down 4.2% as of 0507 GMT on Thursday.
Analysts attributed the drop to news about an “abnormal withdrawal” of 54 billion won worth of cryptocurrencies from Upbit on Thursday. Upbit apologised and said it would fully cover the amount using its own assets.
($1 = 1,462.9000 won)
(Reporting by Hyunjoo Jin, Additional reporting by Kane Wu in Hong Kong, Heekyong Yang in Seoul; Editing by Louise Heavens, Ed Davies)
(Bloomberg) — Binance Holdings Ltd. and its Chief Executive Officer Changpeng Zhao pleaded guilty to anti-money laundering and US sanctions violations under a sweeping settlement with the US that allows the cryptocurrency exchange to continue operating.
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Binance will pay $4.3 billion in one of the largest corporate agreements in US history. Zhao will pay a $50 million fine under a deal that requires him to step down as CEO. Zhao pleaded guilty Tuesday to violating the Bank Secrecy Act in federal court in Seattle. The deal, which includes the Justice Department, Treasury Department and the Commodity Futures Trading Commission, ends a years-long investigation into the exchange.
Binance, which admitted that it allowed transactions with Hamas and other terrorist groups on the platform, was charged with three counts, including anti-money laundering, operating an unlicensed money transmitting business and violating US sanctions. The exchange is paying a criminal fine of $1.8 billion and forfeiting $2.5 billion, according to court filings unsealed Tuesday.
Zhao faces as many as 10 years in prison but is expected to get no more than 18 months under a plea deal that appears to have saved him from the harsh penalties that other prominent crypto criminals have faced. The Justice Department hasn’t decided yet what length of a prison term they will seek for him.
Binance’s violations included failure to prevent and report suspicious transactions with terrorists, including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, Al Qaeda, and the Islamic State of Iraq and Syria, according to the Treasury Department. The announcement comes as Israel and Hamas have been embroiled in a war that began Oct. 7.
Binance also allowed at least 1.1 million transactions, worth more than $898 million, on its platform between customers in US and Iran, according to the court filing.
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed — now it’s paying one of the largest corporate penalties in U.S. history,” Attorney General Merrick Garland said in a press release.
Money from the fine will be split among DOJ, CFTC and other agencies. It includes $3.4 billion to the Treasury Department’s Financial Crimes Enforcement Network and $968 million to its Office of Foreign Assets Control over Bank Secrecy Act and sanctions violations.
New CEO
BNB, a cryptocurrency tied to the Binance ecosystem, slipped about 5.2% following the news. The token had hit a five-month high earlier in the day on the news that the DOJ would soon confirm its settlement with the exchange.
“Binance turned a blind eye to its legal obligations in the pursuit of profit,” Treasury Secretary Janet Yellen said in a press release. “Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform.”
The settlement negotiated between the two sides will resolve all allegations of criminal wrongdoing. Bloomberg News reported the settlement on Monday. Garland and Yellen held a press conference Tuesday to announce details of the deal.
Read More: US Is Seeking More than $4 Billion From Binance to End Case
As part of his plea deal with the government, Zhao, who has a net worth of $23 billion according to Bloomberg’s Billionaires Index, has stepped down as Binance CEO and can’t be involved in managing the company for three years. Richard Teng will succeed Zhao as CEO. Richard Teng will succeed Zhao as CEO.
The company has also agreed to enhance its compliance program and appoint an independent monitor for three years. Binance’s multibillion dollar fine reflects a 20% discount for “partial cooperation” with the investigation, the agreement states.
In a blog post Tuesday, the company acknowledged that it did not have proper compliance controls in its early launch, but said the settlement didn’t include any allegations that Binance misappropriated user funds or engaged in market manipulation.
VIP Customers
The Justice Department accused the company — as well as top executives, including Zhao — of taking steps to conceal that it was dodging US laws intended to stem the flow of dirty money around the world. The filing states that from about August 2017 until October 2022, Binance and Zhao were involved in a “deliberate and calculated effort” to profit from the US market without implementing controls required by law.
Binance “chose not to comply with US legal and regulatory requirements because it determined that doing so would limit its ability to attract and maintain US users,” according to the charging document.
Binance created loopholes that allowed US-based VIP customers to trade on the international exchange through offshore entities. The government’s case relied on internal documents, chats and details of phone calls to show how Binance helped VIP customers circumvent IP address blocking.
These strategies, the government claimed, allowed US-based VIP users to carry out virtual currency transactions “equivalent to billions of US dollars per day.” Acting on instruction from Zhao and other senior management, employees encouraged the VIPs to conceal their US connections, including by creating new accounts.
Zhao, according to the government’s court filings, discussed strategies to keep the market makers on Binance.com to reduce “our own losses” and to have “US supervision agencies not cause us any troubles.”
Zhao was well aware of the presence of US customers on the Binance.com exchange. In a chat in 2019, he wrote that if Binance blocked US customers from day one “Binance will not be as big as we are today.”
A year later, US users still made up 16% of total users on Binance, more than any other country. Binance removed the US label for user location and recategorized it as “UNKWN.”
Zhao wrote that it was “better to ask for forgiveness than permission” and described the situation as a “grey zone.”
CZ in Court
Zhao wore a dark suit and light blue tie, and spent most of the hearing seated with his hands clasped. Judge Brian Tsuchida ruled Zhao would be released and was free to return to his home in the United Arab Emirates while awaiting sentencing.
“I want to close the issue, I want to take responsibility and close this chapter of my life,” Zhao told the court during the hearing. Zhao said he was “a little bit scared” to come to the US to face his plea, but said he was reassured by the court’s thoroughness. “I will return.”
Zhao’s bond was set at $175 million, after his lawyers said he would be prepared to put up that amount to secure his release. Lawyers for the government, who had asked that Zhao be ordered to stay in the country because the US lacks an extradition treaty with the UAE, said they would appeal the release terms.
As part of the release, Zhao’s sister also put up a California home, which his lawyers said was valued at more than $5 million, and two unnamed guarantors committed a total of $350,000.
Zhao faces a maximum sentence of 10 years and fines up to $500,000, plus any profits he made from the alleged scheme. His lawyers said in court that his sentencing will be delayed by 6 months. Zhao’s agreement includes a waiver of his right to appeal, provided that his sentence doesn’t exceed 18 months, judge Tsuchida said during the plea hearing.
Crypto Crackdown
The resolution against the world’s largest cryptocurrency exchange and its top leader represents one of the largest penalties imposed within the cryptocurrency industry, which has been facing withering scrutiny from the Justice Department, other government agencies and lawmakers.
Binance, which exploded onto the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge to more than 60% worldwide after the fall of FTX in November 2022. Since then, its combined market share for spot crypto and derivatives has declined to less than 44% this month, according to researcher CCData.
The Justice Department recently prosecuted FTX co-founder Sam Bankman-Fried in New York for allegedly orchestrating a multibillion-dollar misappropriation of customer funds that led to the cryptocurrency exchange’s collapse. Bankman-Fried was convicted of fraud following a high-profile criminal trial.
Both the CFTC and Securities and Exchange Commission sued Binance and Zhao earlier this year alleging a range of violations, including mishandling customer funds and allowing Americans to illegally access the platform. Tuesday’s settlement resolves the CFTC case but the SEC lawsuit is ongoing.
Zhao worked at Bloomberg LP, the parent company of Bloomberg News, from 2002 to 2005.
–With assistance from Michael P. Regan, Yueqi Yang, stacy-marie ishmael, David Voreacos and Daniel Flatley.
(Updates with details from the press conference and the complaint throughout the story.)
Navi Mumbai’s 38-year-old software engineer has been duped of Rs 1.6 crore by a Filipino woman, who befriended him on a dating app, according to a media report. The Filipino woman, a cyber fraudster, convinced the Kharghar-based man, to do online trading in cryptocurrency, reported The Times of India.
According to the report, the woman identified herself as Rose Chen on the dating app, and befriended the victim in January. She suggested him to invest in crypto saying last year she had earned Rs 2 crore from it. The woman claimed to be a native of Philippines and that her kin are financial advisors in crypto currency investment.
The incident took place between January and May. However, the victim registered the FIR on November 18.
The report also revealed that the woman made him download USB Coin Exchange and Binance apps. It revealed that when he invested $199, it showed $229 profit. Later he invested Rs 1.6 crore, and it showed Rs 2.2 crore profit. On April 5, when he tried to withdraw money, the transaction was rejected.
On enquiring with UBS Coin Exchange customer care, he was told that two illegal transactions of $36,000 had been carried out on his trading account. He later learnt that the USB Coin Exchange was a fake, on enquiring with Binance.
Crypto exchange Binance recently said that it has allocated another $1 billion for its industry recovery initiative, thereby increasing the size of the fund to over $2 billion. The additional allocation was announced by Binance CEO Changpeng “CZ” Zhao on Friday.
The chief executive of dominant cryptocurrency exchange Binance called for new but stable and clear regulations for the industry in light of recent developments and participants “cutting corners”.
“We’re in a new industry, we’ve seen in the past week, things go crazy in the industry,” Changpeng Zhao told a gathering of G20 leaders at a summit in Bali. “We do need some regulations, we do need to do this properly, we do need to do this in a stable way.”
His comments come as crypto industry peers and partners outline steps to deal with the collapse of Sam Bankman-Fried’s rival exchange, FTX. FTX filed for bankruptcy on Friday after a week of seeing customers pull assets and Binance abandoning a rescue offer.
“I think the industry collectively has a role to protect consumers, to protect everybody. So it’s not just regulators. Regulators have a role but it’s not 100 per cent their responsibility,” Zhao said.
On the weekend, he had tweeted that Binance had stopped accepting deposits of FTX’s FTT token on its platform, and urged other exchanges to do the same.
