Key Takeaways
- Binance and CZ Zhao to pay a combined $2.85 billion in penalties to resolve CFTC enforcement action;
- CZ Zhao may serve up to 18 months in prison for money laundering charges, waiving his right to appeal within that timeframe;
- Binance's former chief compliance officer, Samuel Lim, faces a $1.5 million civil monetary penalty for aiding and abetting violations and attempting to evade US law.
Cryptocurrency giant Binance and its former CEO, Changpeng "CZ" Zhao, have been ordered to pay a staggering $2.85 billion in total penalties, marking the resolution of a high-stakes legal battle with the Commodity Futures Trading Commission (CFTC) in the United States.
Under this resolution, Binance will be required to pay a substantial sum of $2.7 billion, while CZ will personally shoulder a $150 million penalty. All of these funds will be directed to the CFTC.
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The settlement, which recently received the green light from the US District Court for the Northern District of Illinois, signifies the culmination of the CFTC's enforcement actions initiated in November.
The CFTC specifically found that both CZ and Binance had contravened the Commodity Exchange Act (CEA) and CFTC regulations.
In its statement, the CFTC outlined the penalties, stating:
The court finds Zhao and Binance violated the Commodity Exchange Act (CEA) and CFTC regulations, imposes a $150 million civil monetary penalty personally against Zhao, and requires Binance to disgorge $1.35 billion of ill-gotten transaction fees and pay a $1.35 billion penalty to the CFTC.
This protracted legal battle between CZ, Binance, and the CFTC, began when the agency sued CZ and the exchange for evading federal law and operating an illegal derivatives platform on March 27.
As part of the settlement reached on November 21, CZ agreed to step down from his position as Binance's CEO. Additionally, on the same day, CZ pleaded guilty to various civil charges and one criminal charge related to Anti-Money Laundering laws.
The court ruling on December 7 mandated CZ to remain in the US until his sentencing on February 23, 2024. He could potentially serve a maximum of 18 months in prison, and he has committed to forgo any appeals within that timeframe.
The court also mandated that Samuel Lim, Binance's former chief compliance officer, pay a civil monetary penalty of $1.5 million for supposedly assisting and abetting Binance's infractions and engaging in actions outside the US with the intent to willfully evade or circumvent United States law.
In light of these developments, Richard Teng, Binance's former global head of regional markets who succeeded CZ as CEO, emphasized the exchange's commitment to compliance.
In an interview, Teng assured investors that Binance had undergone significant changes, leaving behind any past "gaps in compliance."
Under the terms of the settlement, both CZ and Binance have committed to reinforcing Know Your Customer (KYC) measures on the exchange.
Additionally, Binance is obligated to establish a formal corporate governance structure, which includes an independent board of directors, a compliance committee, and an audit committee.
