Binance and Ex-CEO Zhao Hit With $4.8 Billion Penalties in CFTC Settlement
Additionally, the court has ordered Binance to establish a governance structure, including an independent Board of Directors and dedicated Compliance and Audit Committees.
The U.S. District Court for the Northern District of Illinois has officially approved a settlement involving Binance Holdings Limited, former CEO Changpeng Zhao, and affiliated entities, concluding the Commodity Futures Trading Commission's (CFTC) enforcement action.
The court's approval of the consent order, encompassing permanent injunctions, substantial civil monetary penalties, and equitable relief, follows extensive scrutiny over violations of the Commodity Exchange Act (CEA) and CFTC regulations. Changpeng Zhao personally faces a staggering $150 million civil penalty, while Binance is mandated to disgorge $1.35 billion in illicit transaction fees and pay an additional $1.35 billion penalty to the CFTC.
The litigation arises from accusations that Binance, at Zhao's direction, actively solicited U.S. customers, notably quantitative trading firms, facilitating derivative transactions in digital assets. Notably, Binance breached its own Terms of Use, permitting select prime brokers to establish non-compliant "sub-accounts," thereby enabling U.S. customers' direct trading on the platform. Zhao and Binance are accused of masking the existence of U.S. customers and consciously evading U.S. regulatory obligations.
As part of the settlement, Binance and Zhao have confirmed the offboarding of identified trading firms and mandated stringent know-your-customer (KYC) onboarding procedures for all customers. Additionally, the court has ordered Binance to establish a governance structure, including an independent Board of Directors and dedicated Compliance and Audit Committees.
The judicial order, issued by Judge Manish S. Shah, imposes an additional $1.5 million civil penalty on Samuel Lim, Binance's former Chief Compliance Officer. Lim is held accountable for aiding and abetting Binance's violations and engaging in evasive actions beyond U.S. jurisdiction.
This far-reaching enforcement action, marked by unprecedented penalties, underscores the gravity of regulatory violations in the cryptocurrency domain. It serves as a pivotal moment in regulatory oversight within the digital asset landscape, emphasizing the imperativeness of robust compliance measures and steadfast adherence to regulatory frameworks.
