The most powerful man in crypto has lost his crown - and could see his freedom curtailed as well.
The deal with the Justice Department, part of a large settlement between Binance and other U.S. agencies, resolves criminal charges for conducting an unlicensed money transmitter business, conspiracy and breaching sanctions regulations.
It also leaves Zhao's future uncertain.
"Today, I stepped down as CEO of Binance," Zhao tweeted. "Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility."
Zhao, known as CZ, will personally pay $50 million and is barred from all involvement with Binance.
U.S. sentencing guidelines call for prison time of 10 to 18 months for the charges he faces. Prosecutors are seeking an 18-month prison sentence, the New York Times reported.
Zhao and his lawyers did not return calls seeking comment.
LOFTY AMBITIONS
After launching Binance in Shanghai in 2017, Zhao dreamed big. "We want to take over the entire market!" he told staff in a company chat group that year.
The 46-year-old CEO did not waver in his belief as he built up his crypto exchange. Even this year, Zhao felt a major goal was within reach.
"The idea that a five-year-old start-up could mature and operate at the same level as a financial institution that has been around for 200 years was once impossible to fathom," Zhao wrote in January in a review of the previous year. "But we are nearly there today."
Zhao's public aim to be a part of all that has been dashed by Tuesday's guilty plea and settlement.
"By failing to comply with U.S. law, Binance made it easy for criminals to move their stolen funds and illicit proceeds on its exchanges," U.S. Attorney General Merrick Garland said on Tuesday. "Binance also did more than just fail to comply with federal law. It pretended to comply."
'ZHAO ANSWERS TO NO ONE'
Zhao was born in China before moving to Canada in 1989 at age 12, two months after China's Tiananmen Square crackdown on pro-democracy protesters, he wrote in a blog last year.
The tycoon crisscrossed the globe in his quest for success, working in Tokyo and New York before moving to Shanghai, where he embraced crypto and founded Binance.
Its expansion was dramatic. Binance became the world's biggest crypto exchange within six months.
While its market share has slipped this year, it still accounts for about half of global crypto trading volumes, according to research firm CCData.
From the company's earliest days, Zhao kept a tight grip on Binance, as a powerful leader committed to secrecy and focused on market domination, a Reuters report last year found. As CEO, he remained in control of minute operational detail, at the same time posting social media selfies with world leaders and city mayors.
Zhao installed a tight circle of associates, many of whom had worked or studied in China, into top jobs. Co-founder Yi He now runs Binance's venture capital arm, as well as other key departments.
As Binance hired more widely from traditional financial and regulatory worlds, Zhao's tight control over his company was undiminished. The company, which calls itself an "ecosystem," has set up more than 70 entities, most controlled by Zhao personally.
"Zhao answers to no one but himself," the Commodity Futures Trading Commission wrote in March after suing Binance for operating what it called a "sham" compliance program.
It is unclear whether Zhao will now relinquish control of the firms. In the meantime, one of his appointees will take over running Binance.
Richard Teng, a senior Binance executive who joined in 2021, is the new CEO, Zhao posted on social media on Tuesday. Teng "will ensure Binance delivers on our next phase of security, transparency, compliance, and growth," he said.
