· The founder of Binance — the world's largest cryptocurrency exchange — has pleaded guilty to money laundering charges and stepped down as CEO, triggering

Zhao Changpeng is the US Department of Justice's second massive crypto scalp in two months, a succession of downfalls that has left the industry reeling.

Zhao's guilty plea follows the conviction of Sam Bankman Fried, the CEO of another massive cryptocurrency exchange, in a high-profile trial last month.

According to a US Department of Justice press release, Binance will continue to operate under a new CEO and pay a $US4 billion penalty — a move designed to clean up the company without causing the kind of meltdown that accompanied the demise of FTX.

No immediate impact on local industry

Several of Australia's largest cryptocurrency trading platforms, including Swyftx, use Binance to complete trades on behalf of Australian consumers.

"We do not expect the events we've seen overnight in the US to have any impact on any international or national cryptocurrency brokerages, including ourselves," a Swyftx spokesperson told ABC News.

"We have campaigned for regulation for a long time and this is a useful line in the sand that should ultimately elevate global standards and bring them closer to Australian exchanges."

The situation at Binance is unlikely to cause liquidity problems at local exchanges, says Aaron Lane, senior lecturer at RMIT Blockchain Innovation Hub.

"The allegations in relation to Binance have had to do with money laundering," he explained.

"We don't have the same liquidity problems that we saw with FTX."

Many Australians lost their investments after the collapse of FTX when the global exchange was caught misusing customer funds.

"Australian cryptocurrency exchanges have been required to register with AUSTRAC in relation to anti-money laundering, counter-terror finance obligations under federal legislation," Dr Lane said.

Australians at some risk

However, Ben Simpson, founder of cryptocurrency education platform Collective Shift, said should Binance fold, Australian users would face a risk of losing access to their assets.

He said this was only a worst-case scenario, though.

Qiang Tang, associate professor in computer science at the University of Sydney, said there was a low probability of this coming to pass.

The $US4 billion penalty "probably won't have much impact" on Binance's ability to operate, he told ABC News.

Dr Tang said the convictions meant the "whole industry could grow in a healthier manner".

He speculated that other exchanges would likely see an influx of customers leaving Binance, though he said global competitors like Coinbase would be "bigger" winners than local exchanges.

The dual conviction of cryptocurrency exchange CEOs underscores the "reputation challenges" in the sector, Mr Simpson said.

"This situation highlights the importance of self-custody in cryptocurrency, offering a safeguard against the potential inaccessibility of assets, as seen in the case of the FTX collapse," he said.

Binance Australia had a rocky 2023

The Australian financial regulator ASIC cancelled Binance Australia's derivatives licence in April.

It meant the approximately 100 Australians using the company's Australian derivatives product had to unwind their positions, according to a statement the company made at the time.

A month later, the crypto exchange announced it would halt deposits and withdrawals from Australian bank accounts on June 1.

Fellow Binancians,

We regret to inform you that AUD deposits and withdrawals by bank transfer are no longer available to Binance users in Australia. Binance has ceased all AUD trading pairs as of June 1. In order to facilitate withdrawals and trading activities after June 1, you…

— Binance Australia (@Binance_AUS) June 1, 2023

Any Australian dollars left on its books were converted into USDT, a type of cryptocurrency that is worth exactly 1 US dollar.

In the days leading up to the switch-off date, bitcoin was trading at 20 per cent lower than on Australian exchanges.

Then, in July, ASIC raided Binance Australia's offices as part of its investigation into its derivatives business.

Binance Australia did not respond to questions for this story.

Binance founder pleads guilty

Binance's founder and chief executive officer, Zhao Changpeng, a Canadian national, pleaded guilty to criminal charges and agreed to pay $US4 billion to resolve the US investigation.

Zhao is worth $US10.2 billion, according to Forbes.

"Binance became the world's largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in US history," said US Attorney-General Merrick B Garland.

 

Binance founder and former CEO Zhao Changpeng.(Reuters: Costas Baltas)

“When you put growth above compliance, you end up in hot water,” said Jim Lee, chief of the IRS Criminal Investigation.

“Our team of investigators uncovered that Binance disregarded anti-money laundering Know Your Customer laws, failed to register as a money transmitter, and willfully violated US sanctions.

"When you do so, your business becomes a playground for bad actors."

Mr Lee said Binance allowed "hundreds of millions of dollars in illicit proceeds from ransomware variants, darknet transactions, and various internet-related scams" to evade detection by US law enforcement.