U.S. Court Approves CFTC Settlement With Binance

Judge Manish Shah of the U.S. District Court for the Northern District of Illinois has approved the settlement between the Commodity Futures Trading Commission (CFTC) and leading cryptocurrency exchange Binance. 

This comes barely a month after the founder of the exchange Changpeng ‘CZ’ Zhao pleaded guilty to charges related to anti-money laundering violations and stepped down from his position as CEO of the company.

Consequently, the court has “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).”

Binance Agrees to Pay $2.85B to CFTC

On November 21, the CFTC reported that Binance and Zhao, agreed to pay $2.85 billion for willfully evading U.S. law, illegally operating a digital asset derivatives exchange, and other violations. This was around the same time when the U.S. Department of Justice (DOJ) requested for $4.3 billion as the settlement figure from Binance to resolve its ongoing issue.

According to the CFTC settlement, CZ would be required to pay $150 million as civil monetary penalty. Binance will also be required to disgorge $1.35 billion of ill-gotten transaction fees and pay a $1.35 billion penalty to the CFTC. A third of the penalty imposed on Zhao will also be expected to be paid within the next 30 days.

Binance Intentionally Ignored U.S. Regulation

Per a published statement, it was discovered that Binance, on the directive of its former CEO, solicited U.S. customers while it was conversant with the regulation in the region. In the CFTC’s opinion, the crypto exchange intentionally ignored the regulations.

In addition to the penalty, Binance and its former CEO are expected to put in systems that align with corporate governance structures. This includes creating a compliance committee, an audit committee, and a board of directors made up of independent members. 

SEC Sues Binance 

Binance is obviously faced with multiple enforcement actions from the DOJ, CFTC and even the Securities and Exchange Commission (SEC). The SEC sued the exchange in June for operating unregistered US financial companies, misleading investors about the companies’ risk management practices, and inflating trading volumes.

Till now, the SEC is trying to build more arguments against Binance.