Binance Settles with CFTC: $2.7 Billion Penalty

The Commodity Futures Trading Commission (CFTC) has issued an order against the cryptocurrency exchange Binance and its former CEO, Changpeng “CZ” Zhao. The order stipulates that Binance will pay $2.7 billion to the CFTC, while CZ will pay $150 million to the CFTC.

The United States District Court for the Northern District of Illinois granted approval to the settlement previously disclosed by a statement issued by the Commodity Futures Trading Commission (CFTC) on December 18, bringing an end to the enforcement action initiated by the CFTC in November.

The Commodity Futures Trading Commission (CFTC) stated that the court found Zhao and Binance in violation of the Commodity Exchange Act (CEA) and CFTC regulations. The court imposes a civil monetary penalty of $150 million personally against Zhao, and it requires Binance to disgorge $1.35 billion of ill-gotten transaction fees and pay a penalty of $1.35 billion to the CFTC.

The CFTC has held a case against CZ and Binance for a considerable amount of time, and the agreed settlement signifies the closure of the case. The agency filed a lawsuit against the executive and his exchange on March 27, accusing them of violating federal law and operating an unauthorized derivatives exchange.

Within the context of a larger settlement with the United States Department of Justice, the Treasury Department, and the Commodity Futures Trading Commission (CFTC), CZ reached an agreement on November 21 to resign from his position as the CEO of Binance.

Zhao pleaded guilty on the same day to several civil charges and one criminal charge related to legislation on the prevention of money laundering. The order that CZ must remain in the United States until his sentence date of February 23, 2024, was issued on December 7th.

He is facing allegations of money laundering that might result in a prison sentence of up to 18 months, and he has agreed not to appeal any prospective sentence that could be up to that length. As part of the settlement, both CZ and Binance have agreed to ensure the maintenance of Know Your Customer measures on the exchange.

Additionally, Binance has agreed to be required to implement a formalized corporate governance structure, which will include a board of directors with independent members, a compliance committee, and an audit committee.

In addition, the court issued a separate judgment that stipulated that Samuel Lim, who had previously served as the chief compliance officer for Binance, had to pay a civil monetary penalty of $1.5 million for “aiding and abetting Binance’s violations and engaging in activities outside of the United States to willfully evade or attempt to evade legislation in the United States.”

Assuring investors that the days of having “gaps in compliance” were now firmly behind them, Teng described Binance as being “totally different” in an interview that took place on December 5.

When asked about Binance’s future plans, Teng stated that the company was making significant investments to ensure compliance with regulatory agencies from all around the world. Over the previous 18 months, Binance has had to suspend or significantly alter its basic services in several jurisdictions worldwide. These jurisdictions include the Netherlands, Cyprus, Australia, and Canada.