Binance to Pay Previous $2.7B Penalty to CFTC, CZ Also Involved

Jimmy Aki
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The world’s largest crypto exchange, Binance, has seen its earlier penalty ratified by the US justice system.

CZ to Pay $150 Million For CFTC Penalty

According to a Commodity Futures Trading Commission (CFTC) press release, the US District Court for the Northern District of Illinois has approved the previously agreed-upon penalty against the Bitcoin trading platform.

In compliance with this, the Binance exchange is obligated to forfeit a full $1.35 billion of ill-gotten transaction fees, along with an additional $1.35 billion as a penalty, both payable to the CFTC.

Notably, the court’s ruling also included the indictment of former CEO and founder Changpeng Zhao, popularly known as CZ.

The court directed CZ to pay a civil monetary penalty of $150 million for operating an unregistered derivatives exchange and failing to implement necessary know-your-customer (KYC) measures to combat money laundering on the platform.

The cumulative sum of $2.7 billion represents a portion of the penalties imposed in a broader multi-agency investigation, resulting in a total charge of $4.3 billion against the crypto exchange.

The investigation, spanning over a year, was led by the US Department of Justice (DoJ), with the CFTC and two other agencies. These agencies found Binance guilty of money laundering and violations of the US Bank Secrecy Act (BSA).

As part of the settlement terms, CZ was required to step down from his leadership position in the company.

The CFTC’s report further disclosed that Binance permitted two prime brokers to create “sub-accounts” exempted from KYC measures, providing a loophole for US customers to trade on the platform.

Additionally, the CFTC stated that the accused Bitcoin exchange actively encouraged US customers to evade compliance controls in direct violations of extant US laws to the letter.

In a separate order, Judge Manish Shah directed Binance’s former chief compliance officer, Samuel Lim, to pay a civil monetary penalty of $1.5 million for aiding and abetting the exchange’s violations.

Meanwhile, CZ is scheduled for a court appearance and ruling in February 2024. He faces a potential jail term of 18 months and has been instructed not to leave the US until the conclusion of the trial.

Binance Moves Towards Regulatory and Corporate Governance

The US court ruling by Judge Manish Shah underlies an ongoing regulatory action spanning the crypto ecosystem.

Several US government agencies are already taking pointed measures towards bringing the crypto space under regular financial supervision, especially the Securities and Exchange Commission (SEC).

Led by former MIT blockchain professor Gary Gensler, the SEC has taken regulatory action against Coinbase and Kraken. Additionally, there is a pending order with the Binance platform.

The government agency has categorized many digital assets as securities and explicitly mentioned that numerous virtual asset platforms lack approval to offer these assets.

To avoid future shortfalls, the Binance exchange, led by new CEO Richard Teng, has stated that it is now pursuing regulatory and corporate governance with global regulatory stakeholders.

Making this known in his first speech as the CEO, Teng revealed that the exchange is now targeting “responsible growth” across its ecosystem as it seeks to restore the confidence of its customers and government agencies.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.