Following the recent developments involving Binance and its CEO Changpeng Zhao (CZ) with the U.S. Department of Justice (DOJ), the U.S. Commodity Futures Trading Commission (CFTC) has also announced a settlement with the crypto exchange. The CFTC also announced a settlement with the former Binance compliance officer Samuel Lim. These settlements remove a significant threat to the crypto market, where Binance is the market leader.
C FTC’s Proposed Consent Order
The CFTC announced that Zhao and his companies, including Binance Holdings Limited and associated entities, have agreed to a proposed consent order. This order, pending approval by the U.S. District Court for the Northern District of Illinois, aims to resolve all charges brought by the CFTC against CZ and Binance for knowingly bypassing the Commodity Exchange Act (CEA) provisions.
Under the proposed order, Binance is required to disgorge $1.35 billion of ill-gotten gains and pay an additional $1.35 billion as a civil monetary penalty. CZ himself is obligated to pay a $150 million civil penalty. The order also permanently enjoins CZ and Binance from engaging in activities such as willfully evading the CEA, operating as an unregistered futures commission merchant, running an illegal digital asset derivatives exchange, and failing to implement adequate KYC controls, among other illegal activities.
The former Binance Compliance Officer, Samuel Lim, agreed to a proposed consent order for permanent injunction, civil monetary penalty, and equitable relief that will resolve all charges the CFTC brought against Lim. The proposed consent order requires Lim to pay a $1.5 million civil monetary penalty.
Relation to DOJ Actions
This settlement with the CFTC aligns with the actions taken by the DOJ and the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) against Binance Holdings. Zhao has also pleaded guilty to intentionally causing Binance Holdings Limited to violate the Bank Secrecy Act by failing to establish an effective anti-money laundering program.
Read the report about the DOJ settlement with Binance here.
The Broader Impact and Regulatory Cooperation
The CFTC’s action, coupled with the DOJ’s criminal charges and agreements with FinCEN and OFAC, represents a comprehensive regulatory approach to address illegal activities in the cryptocurrency sector. In total, Binance is required to pay over $4.3 billion in criminal forfeiture, penalties, and fines across these actions. The CFTC has expressed gratitude for the cooperation from various U.S. and international regulatory bodies, reflecting a concerted effort to regulate the cryptocurrency market and protect investors.
Preliminary Conclusion
These developments underscore the increasing regulatory focus on cryptocurrency exchanges and their compliance with U.S. laws. The collective actions by the CFTC, DOJ, FinCEN, and OFAC against Binance and its CEO signal a significant shift in the regulatory landscape for digital assets, emphasizing the need for stringent compliance and transparency in the industry. The SEC, which has also filed a lawsuit against Binance and CZ, has not yet announced a settlement. In any case, this is unlikely to be part of the DOJ’s settlement.
