Binance, Changpeng 'CZ' Zhao Handing Over Record $1.35B Fine in CFTC Settlement

The company's CFTC penalties, which were paired with an agreement to give back a separate $1.35 billion to wronged customers, are a big piece of the $4.3 billion in total cash going to the U.S. government, including the U.S. DOJ and Treasury.

AccessTimeIconNov 21, 2023 at 9:30 p.m. UTC
Updated Jan 26, 2024 at 2:58 p.m. UTC
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Crypto exchange Binance and its founder, Changpeng "CZ" Zhao, agreed to pay nearly $3 billion to settle the U.S. Commodity Futures Trading Commission lawsuit against it, including a $1.35 billion fine that is the largest ever secured by the regulator. This builds on separate settlements Tuesday with the U.S. Department of Justice and Treasury Department, which also called Binance's penalties the largest ever targeted at a single corporation.

The CFTC sued Binance earlier this year, alleging that the exchange offered unregistered crypto derivatives products in the U.S. despite knowing that was against the law. The suit highlighted the "maze of corporate entities" Binance had, which an official said demonstrated the exchange's "willful evasion of U.S. law."

In a press conference Tuesday, CFTC Chair Rostin Behnam said the exchange's actions "undermined the foundation of safe and sound financial markets" while collecting $1.35 billion in trading fees.

"As evidenced by the internal chats of Binance’s CCO and others, Binance recognized that its platform was used to facilitate criminal activity, including terrorist financing, but chose to turn a blind eye, all in the name of profits," Behnam said. "Binance and its leaders sought to dupe and indoctrinate their employees and customers, building a cult-like following premised on circumventing their own compliance controls to maximize corporate profits above all else."

Samuel Lim, the former chief compliance officer, will pay $1.5 million as well if a federal judge signs off on the proposed settlements. He is also banned from acting as an unregistered futures commission merchant or operating any illegal crypto derivatives platforms, the regulator said.

Going after a company's compliance chief marked a novel enforcement move for the CFTC, according to Commissioner Caroline Pham. She noted the U.S. Securities and Exchange Commission (SEC) has pursued such officials before, but this is "the first time that the CFTC is charging a compliance officer with individual liability."

"I believe that the alleged facts involving egregious personal conduct demonstrate that the defendant employee was 'compliance in name only,'" Pham said in a statement on Tuesday. "I support sending this strong message to the crypto asset sector, which has all too often demonstrated material weaknesses in both their compliance programs and their risk management programs."

Behnam also noted how quickly the agency resolved its major enforcement action against Binance and its former CEO.

"The resolution of the action against Binance and Zhao – within just 8 months of its filing – solidifies the CFTC’s reputation as the proven leader in the civil enforcement space when it comes to digital assets," the chairman said. "We are stalwart in ensuring CFTC registrants comply with our statute and regulations, which serve to protect broader financial health and that directly impacts millions of American investors."

Unfortunately for Binance, the SEC is still pursuing its similar but separate action against the exchange, which this week's multi-headed government deal didn't satisfy.

UPDATE (November 21, 2023, 00:40 UTC): Adds status as record CFTC fine and comment from Commissioner Pham.

Edited by Nick Baker.


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Nikhilesh De

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.


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