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As a significant development, the District Court for the Northern District of Illinois has delivered its final decision regarding the world’s largest cryptocurrency exchange Binance and its founder and former CEO Changpeng Zhao. The court approved and implemented the consent order for permanent injunction, monetary penalty, and equitable relief against Zhao and Binance. The U.S. Commodity Futures Trading Commission (CFTC) also announced the court’s approval of the settlement.
Binance to Pay $1.35 Billion to CFTC
The court ruled that Zhao and Binance violated the Commodity Exchange Act (CEA) and CFTC regulations, finding Binance under Zhao’s leadership guilty of actively soliciting U.S. customers for digital asset derivative transactions, including quantitative trading firms, and violating their own terms of use.
The court also found that Binance allowed prime brokers to open “sub-accounts” that were not subject to Binance’s Know Your Customer (KYC) procedures. Consequently, Zhao and Binance knowingly concealed the presence of U.S. customers on the platform.
In light of all these allegations, Binance will be required to pay a $1.35 billion penalty to the CFTC. Moreover, Binance will also have to pay for $1.35 billion in unjust transaction fees. Zhao will personally pay a monetary penalty of $150 million.
In a separate order issued by Judge Manish S. Shah, Binance’s former Compliance Director Samuel Lim was fined. Shah ruled that Lim must pay a $1.5 million penalty for aiding and abetting the cryptocurrency exchange’s legal violations and for engaging in activities outside the U.S. to violate U.S. laws.
Compliance and Management Measures
According to U.S. laws, Binance and Zhao will need to obtain certificates regarding the presence and effectiveness of improved compliance controls. Allegedly, continuing without obtaining the certificate and any further violations detected could result in them being permanently barred from operating in the country.
