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Binance settles on CFTC charges, agrees to pay $2.7 billion in fines

Binance systematically skirted KYC to engage Americans in unauthorized digital asset transactions.

Binance settles on CFTC charges, agrees to pay $2.7 billion in fines

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The Commodity Futures Trading Commission (CFTC) announced that the US District Court for the Northern District of Illinois has formally approved and entered its previously disclosed settlement with the largest crypto exchange in the world, Binance, and its former CEO and founder, Changpeng Zhao. 

The consent order requires Zhao to pay $150 million, while Binance must pay $1.35 billion of transaction fees obtained through illegal activity, plus an additional $1.35 billion penalty. 

The Northern District of Illinois found that Binance and Zhao violated commodity trading laws by knowingly soliciting American customers without proper controls. The court said:

“Binance, at Zhao’s direction, actively solicited customers in the United States, including quantitative trading firms, who entered into digital asset derivative transactions directly on the Binance platform. In violation of its own Terms of Use, Binance also allowed at least two prime brokers to open “sub-accounts” that were not subject to Binance’s know your customer (KYC) procedures and enabled U.S. customers to directly trade on the platform.”

Binance and Zhao committed to improving compliance procedures to identify prohibited US customers’ part of the settlement. They have already delisted American trading firms called out in the original CFTC complaint for failing to meet the upgraded requirements. 

The exchange also consented to enact enhanced corporate governance with independent board directors, an audit committee, and a compliance team. A separate order charged Binance’s former chief compliance officer $1.5 million for assisting the evasion attempt. 

This settlement comes on the heels of mounting regulatory pressure faced by Binance and other major crypto exchanges operating in the United States.  It follows Binance US, the US company of Binance, settling with FinCEN for a $3.4 billion civil penalty and a $968 million fine from OFAC to resolve sanctions violations earlier this month 3.4 billion. 

The Securities and Exchange Commission is also continuing an investigation into Binance, launched in late 2022, regarding securities dealings.

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