A U.S. court has recently approved a substantial settlement against the cryptocurrency exchange Binance and its former CEO, Changpeng “CZ” Zhao. As part of the settlement, Binance is required to pay a hefty sum of $2.7 billion, while CZ himself is ordered to pay $150 million to the Commodity Futures Trading Commission (CFTC).
This decision, announced by the CFTC on December 18, marks the end of a significant enforcement action that began in November. The U.S. District Court for the Northern District of Illinois found that both Zhao and Binance had violated the Commodity Exchange Act (CEA) and CFTC regulations. Consequently, the court imposed a $150 million civil monetary penalty on Zhao personally and required Binance to disgorge $1.35 billion of transaction fees deemed ill-gotten and pay an additional $1.35 billion fine to the CFTC.
The case against Binance and CZ has been a long-standing issue, with the CFTC initially suing them on March 27 for evading federal law and operating an illegal derivatives exchange. As part of a broader settlement with the U.S. Department of Justice, the Treasury Department, and the CFTC, CZ agreed to resign from his role at Binance on November 21. On the same day, he pleaded guilty to several civil charges and one criminal charge related to Anti-Money Laundering laws.
Further developments occurred on December 7 when CZ was ordered to remain in the U.S. until his sentencing date on February 23, 2024. He faces a potential prison sentence of up to 18 months on money laundering charges and has agreed not to appeal any ruling up to that length.
As a condition of the settlement, both CZ and Binance have committed to implementing stringent Know Your Customer measures on the exchange. Binance is also required to establish a formalized corporate governance structure. This structure includes a board of directors with independent members, a compliance committee, and an audit committee.
Additionally, the court ordered Binance’s former chief compliance officer, Samuel Lim, to pay a $1.5 million civil monetary penalty for aiding and abetting Binance’s violations and attempting to evade U.S. law.
Following CZ’s departure, Richard Teng, previously Binance’s global head of regional markets, took over as CEO. In a recent interview, Teng emphasized that Binance had transformed, assuring investors that compliance gaps were a thing of the past. He stated that the exchange is fully committed to global regulatory standards.
This settlement comes amid Binance’s operational adjustments in various global jurisdictions, including the Netherlands, Cyprus, Australia, and Canada, where it has had to either terminate or significantly modify its core services. The case and its resolution highlight the increasing scrutiny and regulatory challenges faced by cryptocurrency exchanges operating on a global scale.
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