By
Steve Muchoki
April 26th, 2024
The court order goes beyond financial penalties. It requires Binance and CZ to make certifications regarding the existence, application, and effectiveness of Binance’s enhanced compliance controls.
The US Commodity Futures Trading Commission (CFTC) made a significant announcement, confirming that the US District Court for the Northern District of Illinois has approved the previously disclosed settlement for the Binance exchange and its executive. The court has finally entered a consent order outlining civil monetary penalties and equitable relief against the trading platform and its ex-CEO, Changpeng ‘CZ’ Zhao.
The court findings indicate that both CZ and Binance violated CFTC regulations. This led to the imposition of a substantial $150 million civil monetary penalty directly against CZ. In addition to the financial penalty, Binance is required to disgorge a staggering $2.7 billion, of which $1.35 billion represents ill-gotten transaction fees, and the other $1.35 billion penalty is mandated to be paid to the CFTC.
Binance Misconduct Triggers Aggressive Compliance Push
Notably, this legal resolution underscores the severity with which regulatory bodies view infractions within the cryptocurrency space. Likewise, the court’s decision to impose a personal penalty on CZ, adds a layer of individual accountability. It also emphasizes that leaders of major cryptocurrency platforms will be held responsible for their regulatory breaches.
However, the court order goes beyond financial penalties. It requires Binance and CZ to make certifications regarding the existence, application, and effectiveness of Binance’s enhanced compliance controls. This represents a commitment to ensuring that the exchange implements robust measures to prevent future regulatory violations, fostering a more secure environment for users and investors.
In essence, this legal development is a pivotal moment in the evolving relationship between cryptocurrency exchanges and regulatory bodies. As the cryptocurrency sector continues to grow, such regulatory interventions are crucial for building trust and fostering the long-term sustainability of the digital asset market.
Binance Settlement Post Infractions
Recall that, an unsealed charges document containing details of Binance’s misconduct over the years was released last month. According to reports, Binance focused heavily on the US market, targeting “VIP” customers who could considerably increase the exchange’s trading volume. CZ allegedly did not take adequate measures to filter said customers even though he knew the exchange did not satisfy US requirements.
In addition, documents allege that Binance facilitated “at least 1.1 million” fraudulent transactions worth about $900 million. The exchange allegedly made staff ignore illicit users and allow their transactions if they were VIP customers.
In view of all this misconduct, CZ announced his departure from the CEO role, as part of a settlement deal with the US law enforcement agencies for violations of anti-money laundering laws and other financial crimes. As part of the plea deal with prosecutors, Binance agreed to pay the US Department of Justice $4.3 billion.
Given this, Binance, under new CEO Richard Teng, revealed that it has made significant progress with the regulators. The firm stated that it is always open to scrutiny as it understands that it will help keep it on track.