Binance Will Exit the US Paying over $7.1 Billion in Settlements

by Arnab Shome
  • The exchange reached settlements with both the DoJ and CFTC separately.
  • It is currently contesting the 13 charges brought by the SEC.
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Binance has agreed to enter into a historic corporate settlement by paying over $4.3 billion to settle charges brought by the US Department of Justice (DoJ). The crypto exchange will also remit an additional $2.85 billion to settle with the US commodities regulator.

A Historic Corporate Settlement in the US

Officially confirmed yesterday (Tuesday), $3.8 billion from the settlement with the DoJ will go to the Financial Crimes Enforcement Network, while the Office of Foreign Asset Control will receive $968 million.

In its separate settlement with the Commodity Futures Trading Commission (CFTC), Binance Holdings will return $1.35 billion in “ill-gotten funds” and another $1.35 billion in civil penalties. Further, Binance's former CEO, Changpeng Zhao, agreed to pay a $150 million civil monetary penalty to the agency, while the exchange’s former Chief Compliance Officer, Samuel Lim, will pay an additional $1.5 million.

The DoJ unsealed the charges against Binance yesterday, and the exchange simultaneously pled guilty to violating US anti-money laundering (AML) and sanctions laws. Zhao pled guilty to violating anti-money laundering rules and agreed to step down.

Profit over Compliance

“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” Treasury Secretary Janet Yellen said.

Attorney General Merrick Garland commented along the same lines: “From the very beginning, Zhao and other Binance executives engaged in a deliberate and calculated effort to profit from the US market without implementing the controls required by US law.”

Apart from the monetary settlement, Binance agreed to exit the US markets completely and will “abide by a series of robust sanctions compliance obligations.” Further, Binance will be subjected to a five-year monitorship, granting US Treasury access to the exchange’s books, records, and systems. Failure to comply could “expose Binance to substantial additional penalties, including a $150 million suspended penalty.”

Meanwhile, the array of settlements did not include the charges brought by the US securities regulator against Binance and Zhao. This means the Securities and Exchange Commission (SEC) will continue to fight the exchange and its former CEO in court unless a separate settlement is reached.

Binance’s Response

In a Tweet following the settlement announcement, Zhao admitted that he “made mistakes, and I must take responsibility.”

In a blog post, Binance officially stated: “While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance… Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way.”

Both Binance and Zhao highlighted that the exchange’s guilty plea with the US agencies did not encompass the allegations of user fund misappropriation and market manipulation. Interestingly, the ongoing SEC lawsuit charges Binance for commingling user funds with its own.

With all this commotion, Richard Teng, the former Head of Regional Markets of Binance, has been named the new CEO of the crypto exchange giant, replacing Zhao.

Binance has agreed to enter into a historic corporate settlement by paying over $4.3 billion to settle charges brought by the US Department of Justice (DoJ). The crypto exchange will also remit an additional $2.85 billion to settle with the US commodities regulator.

A Historic Corporate Settlement in the US

Officially confirmed yesterday (Tuesday), $3.8 billion from the settlement with the DoJ will go to the Financial Crimes Enforcement Network, while the Office of Foreign Asset Control will receive $968 million.

In its separate settlement with the Commodity Futures Trading Commission (CFTC), Binance Holdings will return $1.35 billion in “ill-gotten funds” and another $1.35 billion in civil penalties. Further, Binance's former CEO, Changpeng Zhao, agreed to pay a $150 million civil monetary penalty to the agency, while the exchange’s former Chief Compliance Officer, Samuel Lim, will pay an additional $1.5 million.

The DoJ unsealed the charges against Binance yesterday, and the exchange simultaneously pled guilty to violating US anti-money laundering (AML) and sanctions laws. Zhao pled guilty to violating anti-money laundering rules and agreed to step down.

Profit over Compliance

“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” Treasury Secretary Janet Yellen said.

Attorney General Merrick Garland commented along the same lines: “From the very beginning, Zhao and other Binance executives engaged in a deliberate and calculated effort to profit from the US market without implementing the controls required by US law.”

Apart from the monetary settlement, Binance agreed to exit the US markets completely and will “abide by a series of robust sanctions compliance obligations.” Further, Binance will be subjected to a five-year monitorship, granting US Treasury access to the exchange’s books, records, and systems. Failure to comply could “expose Binance to substantial additional penalties, including a $150 million suspended penalty.”

Meanwhile, the array of settlements did not include the charges brought by the US securities regulator against Binance and Zhao. This means the Securities and Exchange Commission (SEC) will continue to fight the exchange and its former CEO in court unless a separate settlement is reached.

Binance’s Response

In a Tweet following the settlement announcement, Zhao admitted that he “made mistakes, and I must take responsibility.”

In a blog post, Binance officially stated: “While Binance is not perfect, it has strived to protect users since its early days as a small startup and has made tremendous efforts to invest in security and compliance… Binance grew at an extremely fast pace globally, in a new and evolving industry that was in the early stages of regulation, and Binance made misguided decisions along the way.”

Both Binance and Zhao highlighted that the exchange’s guilty plea with the US agencies did not encompass the allegations of user fund misappropriation and market manipulation. Interestingly, the ongoing SEC lawsuit charges Binance for commingling user funds with its own.

With all this commotion, Richard Teng, the former Head of Regional Markets of Binance, has been named the new CEO of the crypto exchange giant, replacing Zhao.

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