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Binance and CZ Settle Historic CFTC Case for $2.85 Billion, Approved by Court

In a significant ruling, the U.S. District Court for the Northern District of Illinois has concluded a prolonged legal battle involving cryptocurrency exchange Binance and its former CEO, Changpeng Zhao (CZ), with a monumental settlement.

The Commodity Futures Trading Commission (CFTC) has mandated Binance to pay $2.7 billion and CZ to pay $150 million, marking the end of a case that has reverberated throughout the crypto sphere.

The court-approved settlement addresses violations of the Commodity Exchange Act (CEA) and CFTC regulations by Zhao and Binance. It includes a $150 million civil penalty against Zhao personally and mandates Binance to disgorge $1.35 billion in ill-gotten transaction fees, coupled with a $1.35 billion penalty to the CFTC.

This resolution draws the curtain on a protracted legal saga initiated by the CFTC’s enforcement action in November, alleging CZ and Binance’s contravention of federal laws and the operation of an illegal derivatives exchange.

The agreement comes subsequent to CZ’s agreement on November 21 to step down from his position at Binance, as part of a comprehensive settlement involving the U.S. Department of Justice, the Treasury Department, and the CFTC. On the same day, Zhao admitted to multiple civil charges and one criminal charge related to Anti-Money Laundering regulations.

CZ’s legal future is constrained as he faces a February 23, 2024 sentencing date, with a potential maximum sentence of 18 months for money laundering charges, in addition to his commitment not to contest any sentence up to that duration.

As part of the settlement terms, both CZ and Binance have committed to fortifying Know Your Customer (KYC) protocols on the exchange. Binance is also obligated to institute a structured corporate governance setup, comprising independent board members, a compliance committee, and an audit committee.

Simultaneously, a separate ruling mandates Binance’s former chief compliance officer, Samuel Lim, to pay a $1.5 million civil monetary penalty for aiding and abetting Binance’s violations and engaging in activities aimed at willfully evading U.S. law outside of the country.

Following CZ’s departure, Richard Teng, previously Binance’s global head of regional markets, assumed the role of CEO.

Teng, in an interview with Cointelegraph emphasized Binance’s transformation, assuring stakeholders that the era of compliance gaps was unequivocally behind them. He underscored Binance’s unwavering commitment to stringent compliance with global regulatory frameworks.

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