Binance and CZ pay billions in settlement with CFTC

The court’s decision mandates Binance to disgorge $1.35 billion obtained from transaction fees and to pay an additional $1.35 billion as a civil penalty to the CFTC. Additionally, CZ was hit personally with a $150 million civil monetary penalty.

This resolution is the culmination of a case initiated by the CFTC against Zhao and Binance on March 27. The agency’s lawsuit accused the executive and his exchange of evading federal law and operating an illegal derivatives exchange. The settlement, initially reached in late November, was finalized with the court’s recent approval.

The CFTC’s statement on December 18 confirmed the court’s approval of the settlement and the conclusion of this enforcement action, which marks the end of a long-running legal battle.

Binance previously tried to dismiss the lawsuit, arguing that the CFTC is overstepping its jurisdictional boundaries by attempting to regulate foreign entities operating outside the United States. Binance criticized the CFTC’s effort to expand its authority beyond the confines of the U.S. Commodity Exchange Act.

The cryptocurrency exchange further highlighted that the CFTC introduced broadened arguments and redefined the term “U.S. person”, suggesting the regulator was seeking global control over any activity related to derivatives products in the crypto domain.

Earlier this month, a U.S. district judge accepted a guilty plea from CZ on charges related to anti-money laundering violations.

CZ pleaded guilty last month to anti-money laundering and sanctions violations following years-long probes by federal regulators. As part of a settlement, Binance, the cryptocurrency exchange he co-founded, agreed to pay $4.3 billion, making it one of the largest corporate settlements in history. Additionally, CZ agreed to pay a $50 million fine and stepped down as CEO of Binance.

With a potential maximum prison sentence of 18 months as per federal guidelines, Zhao has committed not to appeal any sentence up to that duration. However, it wasn’t decided whether CZ can leave the United States before his sentencing, which is scheduled for February 23, 2024. He currently resides in the United Arab Emirates (UAE), and federal prosecutors have objected to allowing him to leave the United States. They said that Zhao poses a flight risk due to his substantial wealth and the fact that the UAE, where he resides, does not have an extradition treaty with the U.S. CZ is released on a $175 million bond.

Zhao’s defense argues that he does not pose a flight risk, as previously determined by Judge Brian Tsuchida, and that the government has not provided adequate grounds for an appeal to overturn this finding. They elaborated on CZ’s visibility as a global public figure and his track record, including a lack of criminal history and the non-violent nature of his offenses, to argue against the necessity of him staying in the U.S. before sentencing.