In the U.S., a federal judge has sanctioned a comprehensive settlement involving the prominent crypto exchange, Binance, and the Commodity Futures Trading Commission (CFTC). This resolution comes on the heels of a guilty plea by Binance‘s former CEO, Changpeng Zhao (CZ), in relation to charges concerning anti-money laundering infractions. This means that the black swan of a Binance collapse has been averted for the time being.
Settlement Details
The Court approved the previously announced settlement and entered a consent order of permanent injunction, civil monetary penalty, and equitable relief against Changpeng Zhao and his companies Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited (together, Binance).
As part of the settlement, Changpeng Zhao is mandated to pay a substantial fine of $150 million. A notable aspect of this agreement is the stipulation that a third of this amount must be paid within the next 30 days. Additionally, Binance is subjected to a hefty penalty, required to pay $1.35 billion to the CFTC. Furthermore, the exchange is ordered to disgorge an equivalent sum of $1.35 billion, labeled as “ill-gotten transaction fees.”
CFTC’s Stance on Binance’s Conduct
The CFTC’s statement released on Monday throws light on the crux of the issue. It outlines that under Zhao’s direction, Binance actively solicited customers within the United States, fully aware of the existing U.S. regulations but deliberately chose to disregard them.
The order further finds CZ and Binance were aware of U.S. regulatory requirements but chose to ignore them.
Corporate Governance Reforms
A crucial component of the consent order is the imposition of a new corporate governance structure for Binance. This includes the establishment of a board of directors with independent members, alongside a compliance committee and an audit committee. Such measures are aimed at ensuring greater oversight and adherence to regulatory norms.
Zhao’s Departure and Legal Proceedings
In an unfolding of events, Changpeng Zhao agreed to resign from his leadership role at Binance on November 21, as part of a broader settlement with several U.S. authorities, including the Department of Justice and the Treasury Department, alongside the CFTC. On this day, Zhao also admitted guilt to various civil and a singular criminal charge related to Anti-Money Laundering laws. Subsequently, on December 7, Zhao was ordered to remain in the U.S. until his sentencing on February 23, 2024. He faces a potential 18-month imprisonment for money laundering charges and has consented not to contest any sentence up to that duration.
Zhao also resigned as the chairman of the board of directors for Binance.US. This move effectively severs his administrative ties with the U.S. arm of the exchange, leaving his interest in the entity solely economic.
Penalty for Former Chief Compliance Officer
Additionally, the court has imposed a separate penalty on Binance’s former chief compliance officer, Samuel Lim. Lim is ordered to pay a $1.5 million civil monetary penalty for his role in abetting Binance’s regulatory violations and attempting to circumvent U.S. law.
