The Commodity Futures Trading Commission announced Changpeng Zhao, and his companies Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited (together, Binance) agreed to a proposed consent order for permanent injunction, civil monetary penalty, and equitable relief that, if entered by the US District Court for the Northern District of Illinois, will resolve all charges the CFTC brought against Zhao and Binance for knowingly disregarding provisions of the Commodity Exchange Act (CEA) to profit from their operation of an illegal digital assets derivative exchange.
The proposed consent order requires Binance to disgorge $1.35 billion of ill-gotten gains and pay a $1.35 billion civil monetary penalty to the CFTC, and obliges Zhao to pay a $150 million civil monetary penalty to the CFTC. In addition, the order permanently enjoins Zhao and Binance from willfully evading the CEA; acting as an unregistered futures commission merchant (FCM); operating an illegal digital asset derivatives exchange; and failing to have adequate know-your-customer compliance controls among other illegal activities in the order. The defendants must also certify that certain remedial measures have been implemented and Binance must further certify it will take certain remedial steps in the future, including no longer allowing “sub-accounts” to circumvent Binance’s newly implemented compliance controls.
Also, the US Department of Justice (DOJ) and the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) announced charges against Binance Holdings. Binance and Zhao also resolved charges with DOJ, FinCEN and OFAC that, in total with the CFTC, require over $4.3 billion payment in monetary penalties.
“Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from US customers,” said CFTC chair Rostin Behnam.
In a separate announcement, Binance’s former chief compliance officer, Samuel Lim, agreed to pay $1.5 Million for willfully evading US Law, and aiding and abetting the illegal operation of a digital asset derivatives exchange, and other violations. According to multiple media reports, Zhao stepped down as CEO after pleading guilty to the money laundering charges.