A US court took decisive action on Monday by issuing an order against Binance and its former CEO, Changpeng Zhao, in response to charges filed by the Commodity Futures Trading Commission (CFTC).
The court approved the substantial settlement, formalizing an agreement initially announced on November 21.
The CFTC stated, “In formalizing the settlement initially announced on November 21, the court finds Zhao and Binance violated the Commodity Exchange Act (CEA) and CFTC regulations.”
Under the terms of the settlement, Zhao is now obligated to pay a civil monetary penalty of $150 million.
Additionally, three entities connected to him, namely Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited, collectively referred to as Binance, are required to disburse $1.35 billion in ill-gotten transaction fees, along with an additional penalty of $1.35 billion.
In addition to the financial penalties, Zhao and Binance must also provide certifications concerning the existence, application, and effectiveness of Binance’s enhanced compliance controls.
Furthermore, they are permanently enjoined from further violations as charged.
The CFTC had initiated the first charges against Binance and its former CEO in March earlier in the year. These charges revolved around Binance’s alleged solicitation of US customers, including two quantitative trading firms, under Zhao’s leadership.
The regulator also accused them of operating in the US without adhering to regulatory requirements and questioned their compliance practices.
As part of the settlement, Binance and Zhao have certified that they have offboarded the quantitative trading firms mentioned in the CFTC’s complaint.
They have also pledged to ensure that any future customers undergo comprehensive Know Your Customer (KYC) onboarding procedures.
Furthermore, the settlement mandates that Binance no longer permits existing sub-accounts, including those established by prime brokers, to bypass the platform’s compliance controls.
It also requires the offboarding of accounts that fail to meet these compliance standards.
Meanwhile, Binance has separately reached a settlement with US federal prosecutors, agreeing to pay a staggering sum of over $4.3 billion for violations related to anti-money laundering and sanctions rules.
The exchange has committed to winding down its operations in the US, and Zhao has pled guilty to one count of money laundering, awaiting sentencing with a maximum prison term of 18 months as part of a plea agreement.
However, Binance continues to contest charges brought by the Securities and Exchange Commission (SEC), which include allegations of commingling customers’ funds with the company’s assets and numerous other violations.