A United States court yesterday (Monday) entered an order against Binance and its former CEO, Changpeng Zhao, approving the massive settlement against the charges brought by the Commodity Futures Trading Commission (CFTC).
“In formalizing the settlement initially announced on November 21, the court finds Zhao and Binance violated the Commodity Exchange Act (CEA) and CFTC regulations,” the CFTC wrote in a statement.
Hefty Monetary Fines
With the agreement of the US District Court for the Northern District of Illinois, Zhao will now pay a civil monetary penalty of $150 million, whereas three entities headed by him, Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited (together, Binance), will need to $1.35 billion of ill-gotten transaction fees, along with an additional penalty of $1.35 billion.
Apart from the monetary penalties, Zhao and Binance additionally have “to make certifications as to the existence, application, and efficacy of Binance’s improved compliance controls, and permanently enjoins them from further violations as charged.”
The CFTC was the first US regulator to formally bring charges against Binance and its former CEO in March earlier this year. The charges blamed Binance for soliciting US customers, including two quantitive trading firms, under Zhao's leadership. The regulator further charged the two for operating in the US without following the regulatory requirements and questioned the compliance practices.
“In connection with the order, Binance and Zhao have certified that subsequent to the filing of the CFTC’s complaint Binance has offboarded the quantitative trading firms identified in the CFTC’s complaint as they do not meet Binance’s improved onboarding criteria. Binance and Zhao also certified that any customer who seeks to onboard, whether through a primary or 'sub-account' must complete all KYC onboarding procedures,” the regulator added.
The settlement further required the exchange to no longer allow existing sub-accounts, including those opened by prime brokers, to bypass the platform’s compliance controls. It further needs to offboard the accounts that do not meet compliance controls.
???? @binance's compliance monitorship will give the U.S. government inside access like it’s never had before, says Dorothy DeWitt, former Director of the Division of Market Oversight at the CFTC.????Listen now: https://t.co/nTAjlSULeX pic.twitter.com/epINw2Xles
— Laura Shin (@laurashin) December 12, 2023
Binance’s Troubles in the US
Meanwhile, Binance settled with the US federal prosecutors, paying an astronomical sum of over $4.3 billion for the violations of the anti-money laundering and sanctions rules. The exchange also committed to winding down its operations entirely in the US. On top of that, Zhao pled guilty to one count of money laundering and is now awaiting sentencing. With a plea agreement in place, he is looking at a maximum prison time of 18 months.
However, Binance is still fighting the Securities and Exchange Commission in court. The regulator accused Binance of comingling customers’ funds with the company’s, among a dozen other charges.
This article was written by Arnab Shome at www.financemagnates.com.
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