CFTC Deal: BINANCE and CZ’s Historic Billion-Dollar Payout

The approval of a settlement by the U.S. District Court for the Northern District of Illinois commands significant fines from Binance and its former CEO, Changpeng Zhao, known as CZ, to be paid to the Commodity Futures Trading Commission (CFTC).

This decision mandates Binance to surrender $1.35 billion acquired from transaction fees and pay an additional $1.35 billion as a civil penalty to the CFTC. CZ, personally affected, faces a $150 million civil monetary penalty.

Initiated on March 27 by the CFTC against Zhao and Binance, the case accused the executive and the exchange of evading federal law and running an illegal derivatives exchange. The settlement, initially reached in late November, recently gained final approval from the court.

The CFTC confirmed on December 18 the court's endorsement of the settlement, signifying the conclusion of this long-standing legal battle.

Previously, Binance attempted to dismiss the lawsuit, contending that the CFTC exceeded its jurisdictional boundaries by attempting to regulate foreign entities outside the United States, critiquing the regulator's expansion efforts beyond the U.S. Commodity Exchange Act confines.

The cryptocurrency exchange highlighted the CFTC's broader arguments and redefined interpretation of the term “U.S. person,” indicating the regulator's pursuit of global control over derivatives products in the crypto domain.

Earlier this month, a U.S. district judge accepted CZ's guilty plea for anti-money laundering violations, the outcome of extensive federal probes. As part of the settlement, Binance, the co-founded cryptocurrency exchange, agreed to a $4.3 billion payment, constituting one of the largest corporate settlements. CZ also consented to a $50 million fine and stepped down as CEO of Binance.

Subject to federal guidelines allowing an 18-month maximum prison term, Zhao agreed not to contest any sentence within that duration. However, the decision on CZ's departure from the United States before his February 23, 2024, sentencing remains pending. He presently resides in the United Arab Emirates (UAE), with federal prosecutors opposing his departure. They cite Zhao's considerable wealth and the absence of an extradition treaty between the UAE and the U.S. CZ has been released on a $175 million bond.

Zhao's defense rebuts the flight risk assertion, referencing Judge Brian Tsuchida's previous ruling and arguing insufficient grounds for an appeal to reverse it. They stress CZ's global public figure status, his clean record, and the non-violent nature of his offenses as reasons against the necessity of his presence in the U.S. before sentencing.