Cryptocurrency exchange Binance moved $3.9 billion worth of Tether (USDT) stablecoins between its wallets last week, just days before the company agreed to a $4.3 billion settlement deal with U.S. authorities, pleading guilty to money laundering charges.
The timing and amount of the Tether transfer has raised speculation Binance may use the funds to pay the massive criminal penalty levied as part of the settlement. Most of the money was shifted from one Binance cold wallet to another — these wallets are used by the company to store the bulk of its holdings. The latter wallet is a hot wallet, meaning that funds stored there are more immediately accessible.
Settlement Ends Years of Scrutiny
Binance CEO Changpeng Zhao also pleaded guilty to charges as part of the deal announced this week. In addition to $1.8 billion in criminal fines, Binance will forfeit $2.5 billion more, with portions going to the CFTC, FinCEN, and OFAC. This brings the total penalty to $4.3 billion — similar to the amount moved days prior between Binance wallets.
Tether, whose tokens make up the transferred funds, is a controversial stablecoin issuer that has faced questions over its dollar reserves backing the widely-used USDT token. Tether settled its own investigation in 2021, paying $18.5 million related to whether it actually held sufficient dollar amounts to back issued USDT tokens 1:1 with cash reserves.
If Binance uses its Tether holdings to pay U.S. authorities, it could further legitimize the stablecoin. But Binance has yet to confirm if the purposes of the transfer was related to accumulating funds for the settlement deal that was being negotiated around the same time. The company did not respond to requests for comment.
The transactions occurred right 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 ends years-long investigations into the crypto exchange, which dominates trading volumes across the industry.
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