Binance, the world’s largest cryptocurrency exchange by trading volume, has agreed to pay $1.35 billion to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) over its unregistered derivatives trading activities.
The settlement, announced on Tuesday, marks the end of a long-running legal dispute between Binance and the CFTC, which accused the exchange of illegally offering futures, options, and swaps to U.S. customers without registering as a futures commission merchant or a designated contract market.
According to the CFTC, Binance allowed U.S. customers to access its platform through various means, such as using virtual private networks (VPNs) or third-party intermediaries and failed to implement adequate know-your-customer (KYC) and anti-money laundering (AML) procedures.
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As part of the settlement, Binance has agreed to cease all derivatives trading for U.S. customers, cooperate with the CFTC in any ongoing or future investigations, and implement a comprehensive compliance program to prevent future violations.
Additionally, Binance’s founder and CEO Changpeng Zhao, also known as CZ, has agreed to pay $150 million personally to resolve allegations that he was responsible for the exchange’s unlawful conduct. The CFTC said that CZ was aware of the regulatory risks and failed to take appropriate steps to comply with U.S. laws.
In a statement, CZ said that he accepted the settlement as a way to “put this matter behind us and move forward with a clean slate.” He added that Binance remains committed to serving its global customers and expanding its product offerings in a compliant manner.
The SEC accused Binance of operating an unregistered securities exchange and facilitating illegal transactions involving digital assets. The SEC also alleged that Binance failed to implement adequate anti-money laundering and customer identification procedures, and that it misled investors about its compliance with U.S. laws and regulations.
According to the settlement agreement, Zhao will pay $100 million in civil penalties and $50 million in disgorgement of ill-gotten gains. He will also cooperate with the SEC’s ongoing investigation into Binance and its affiliates, and refrain from violating any federal securities laws in the future.
Zhao said in a statement that he accepted the settlement as a way to resolve the legal dispute and move forward with his business. He said that he respects the SEC’s role in protecting investors and maintaining market integrity, and that he is committed to complying with all applicable rules and regulations.
He also said that he is proud of what Binance has achieved in the past five years, and that he will continue to innovate and serve the global crypto community. He thanked his customers, partners, employees, and supporters for their trust and loyalty.
The settlement marks a major setback for Zhao, who founded Binance in 2017 and grew it into a crypto empire with millions of users and billions of dollars in daily trading volume. Binance offers a wide range of services, including spot trading, futures trading, margin trading, lending, staking, mining, and more.
However, Binance has also faced increasing regulatory scrutiny and pressure from various jurisdictions around the world. In recent months, Binance has been banned or restricted by authorities in the U.K., Japan, Germany, Italy, Singapore, Canada, Thailand, Hong Kong, and other countries. The SEC’s lawsuit was one of the most serious legal challenges for Binance and Zhao.
The settlement does not resolve all of Binance’s regulatory issues, as it only covers its activities in the U.S. market. Binance still faces potential investigations and actions from other regulators and law enforcement agencies around the world. It remains to be seen how Binance will adapt to the changing regulatory landscape and maintain its dominant position in the crypto industry.
The settlement is the latest in a series of regulatory actions against Binance, which has faced scrutiny from authorities in several countries over its operations. Binance has also been sued by customers who claimed that they lost money due to technical glitches or market manipulation on the exchange.
Binance has maintained that it operates with high standards of compliance and security, and that it is willing to work with regulators to address their concerns. The exchange has also hired several former regulators and industry veterans to bolster its legal and compliance team.