As was reported earlier today, Binance has settled charges in a comprehensive manner, paying total penalties of $4.3 billion, described as the largest settlement of its kind ever. Binance is noted as the largest crypto exchange in the world, handling approximately 60% of centralized digital asset spot trading.
Binance reportedly handled over 1.67 million trades between August 2017 and October 2022 between US persons and users in sanctioned jurisdictions and blocked persons.
The US Department of Treasury, including FinCEN, OFAC, and the IRS, said it had held Binance accountable for its violations of US anti-money laundering (AML) laws along with sanctions violations.
Treasury said the violations included terrorist activity, naming Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and the Islamic State of Iraq and Syria (ISIS). Treasury said other malicious actors included ransomware attackers, money launderers, and other criminals, as well as matching trades between U.S. users and those in sanctioned jurisdictions like Iran and North Korea.
As well, the settlements are part of an agreement with Binance to resolve matters with both the Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC).
Treasury said the settlement included:
- FinCEN’s settlement agreement assesses a civil money penalty of $3.4 billion, imposes a five-year monitorship, and requires significant compliance undertakings, including to ensure Binance’s complete exit from the United States.
- OFAC’s settlement agreement assesses a penalty of $968 million and requires Binance to abide by a series of robust sanctions compliance obligations, including full cooperation with the monitorship overseen by FinCEN.
- Binance founder and CEO Changpeng Zhao is to pay a $150 million civil monetary penalty to the CFTC.
Treasury said that it will maintain access to books and records of Binance for a period of five years to ensure Binance is abiding by the agreement.
Treasury said it worked closely with the DOJ, including the Criminal Division’s Money Laundering and Asset Recovery Section, the National Security Division’s Counterintelligence & Export Control Section, and the U.S. Attorney’s Office for the Western District of Washington, as well as the CFTC.
Binance as acknowledged that it “willfully operated as an unregistered money services business (MSB) while obscuring its ties to the U.S. and maintaining its most commercially important U.S. customers.”
The company also admitted that it failed to establish and incorporate effective AML/KYC practices.
Binance has agreed to a lookback at past transactions to identify and report to FinCEN suspicious transactions that it processed and did not report.
Treasury stated that Binance new it was violating sanctions but deliberately ignored responsibilities while recommending users to use VPNs to circumvent geofencing controls.
Subject to court approval, the CFTC said their proposed consent order requires Binance to disgorge $1.35 billion of ill-gotten gains and pay a $1.35 billion civil monetary penalty to the CFTC, and obliges Zhao to pay a $150 million civil monetary penalty to the CFTC.
Former Binance Chief Compliance Officer, Samuel Lim, has agreed to a proposed consent order which will resolve all charges the CFTC brought against Lim by the CFTC. Lim is required to pay a $1.5 million civil monetary penalty.
“Today’s proposed resolution of the CFTC’s action against Zhao and his company makes clear that Binance miscalculated the cost of its corporate strategy of regulatory evasion,” said CFTC’s Director of Enforcement Ian McGinley. “Binance’s chief compliance officer’s remark that Binance’s solicitation of U.S. persons would implicate a chain of events including: ‘CFTC = civil case = pay a fine and settle’ was a poor business decision.”