A U.S. court has delivered a significant ruling against Binance, a prominent cryptocurrency exchange, and its former CEO Changpeng Zhao (CZ), mandating Binance to pay a sum of $2.7 billion and CZ to fork over $150 million to the Commodity Futures Trading Commission (CFTC).
The CFTC made the announcement on December 18, confirming that the U.S. District Court for the Northern District of Illinois had granted approval for the settlement. The resolution concluded the enforcement action initiated by the CFTC in November, establishing that both Zhao and Binance had breached the Commodity Exchange Act (CEA) and CFTC regulations. As a result, the court imposed a civil penalty of $150 million on Zhao personally, in addition to demanding that Binance reimburse $1.35 billion in improper transaction fees to the CFTC.
This finalized settlement brings an end to the CFTC's extensive lawsuit against CZ and Binance, which commenced earlier. The agency accused Zhao and the exchange of violating federal laws and running an unlawful derivatives exchange, a matter that led to the indictment of the executive and the exchange on March 27.
Part of the resolution included CZ's decision to step down from his position at Binance, as agreed upon in a broader settlement with the U.S. Department of Justice, Treasury, and the CFTC on November 21. Zhao pleaded guilty to multiple civil charges and a criminal charge related to anti-money laundering laws on the same day. Subsequently, he was directed to stay in the U.S. until sentencing on February 23, 2024, facing a potential maximum sentence of 18 months for money laundering charges.
To comply with the settlement terms, CZ and Binance committed to reinforcing "know your customer" measures, and Binance was mandated to establish a formal corporate governance structure. This structure includes a board of directors comprised of independent members, a compliance committee, and an audit committee. Additionally, the court separately penalized Binance's former chief compliance officer, Samuel Lim, with a $1.5 million civil penalty for his involvement in activities that aided Binance's illegal conduct and attempted to evade U.S. laws.
Following CZ's departure, Richard Teng, Binance's former global head of regional markets, assumed the role of CEO. In an interview, Teng emphasized Binance's transformed compliance landscape and its commitment to meeting global regulatory requirements. Over the past 18 months, Binance has faced regulatory challenges worldwide, necessitating adjustments or terminations of its core services in various jurisdictions, including the Netherlands, Cyprus, Australia, and Canada.
