Changpeng Zhao, founder of cryptocurrency exchange Binance, and his companies Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited, have agreed to a settlement with the Commodity Futures Trading Commission (CFTC) to resolve charges of operating an illegal digital asset derivatives exchange and violating the Commodity Exchange Act (CEA). The proposed consent order, submitted to U.S. District Judge Manish Shah in the Northern District of Illinois, carries significant financial penalties and mandates substantial remedial actions.
The settlement requires Binance to disgorge $1.35 billion in ill-gotten gains and pay a $1.35 billion civil monetary penalty to the CFTC. Zhao himself will pay a $150 million civil monetary penalty. The order permanently enjoins both Zhao and Binance from a range of prohibited activities, including willfully evading the CEA, acting as an unregistered futures commission merchant (FCM), operating an illegal digital asset derivatives exchange, and failing to implement adequate “know-your-customer” (KYC) compliance controls.
The CFTC alleges that Binance knowingly disregarded regulations to profit from its operations, collecting approximately $1.35 billion in trading fees from U.S. customers while intentionally avoiding basic compliance obligations. The company is also required to certify the implementation of remedial measures, including the elimination of “sub-accounts” designed to circumvent newly implemented compliance controls.
“Binance’s activities undermined the foundation of safe and sound financial markets,” stated CFTC Chairman Rostin Behnam. “American investors…have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place.”
CFTC’s Director of Enforcement, Ian McGinley, highlighted the failed regulatory evasion strategy, citing a Binance chief compliance officer’s remark anticipating a civil case and fine for soliciting U.S. persons. The Department of Justice (DOJ) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) also announced charges against Binance Holdings today.
The proposed settlement remains subject to court approval. Gretchen Lowe, CFTC’s Enforcement Division Principal Deputy Director and Chief Counsel, emphasized that customer protection, market integrity, accountability, and deterrence were guiding principles in bringing the enforcement action.
Source: CFTC.gov
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