The Commodity Futures Trading Commission (CFTC) yesterday (December 18, Monday)announced that the U.s. District Court for the Northern District of llinois has approved thepreviously announced settlement and entered a consent order of permanent injunction, civimonetary penalty, and equitable relief against Changpeng Zhao and his companies BinanceHoldings Limited, Binance Holdings (lE) Limited, and Binance (Services) Holdings Limited(together, Binance).

In formalizing the settlement initially announced on November 21, the court finds Zhao andBinance violated the Commodity Exchange Act (CEA) and CFTC regulations, imposes a $150million civil monetary penalty personally against Zhao, and requires Binance to disgorge $1.35billion of ill-gotten transaction fees and pay a $1.35 billion penalty to the CFTC. The order alsoobligates Zhao and Binance to make certifications as to the existence, application, and efficacyof Binance's improved compliance controls, and permanently enjoins them from furtherviolations as charged.

As previously announced, the order finds Binance, at Zhao's direction, actively solicitedcustomers in the United States, including quantitative trading firms, who entered into digitalasset derivative transactions directly on the Binance platform. ln violation of its own Terms ofUse, Binance also allowed at least two prime brokers to open "sub-accounts" that were notsubject to Binance's know your customer (KYC) procedures and enabled U.S. customers todirectly trade on the platform.

The order further finds Zhao and Binance were aware of U.S. regulatory requirements, butchose to ignore them and knowingly concealed the presence of U.S. customers on theplatform. The order also finds Zhao and other members of Binance's senior managementactively facilitated violations of US. law, including instructing U.S. customers to evadecompliance controls.

ln connection with the order, Binance and Zhao have certified that, subsequent to the filing ofthe CFTC's complaint, Binance has offboarded the guantitative trading firms identified in theCFTC's complaint as they do not meet Binance's improved onboarding criteria. Binance andZhao also certified that any customer who seeks to onboard, whether through a primary or "subaccount," must complete all KYC onboarding procedures

The order requires Binance and Zhao to make additional certifications, including that Binancewill no longer allow existing sub-accounts, including those opened by prime brokers, to bypassthe platform's compliance controls. Also, after applying all KYC policies and procedures to allexisting sub-accounts, Binance will offboard every account that fails to meet its compliancecontrols. In addition, the order requires Binance and Zhao to certify Binance will implement acorporate governance structure that includes a Board of Directors with independent membersa Compliance Committee, and an Audit Committee.

A separate order, also issued by Judge Manish S. Shah, requires Binance's former ChiefCompliance Officer Samuel Lim to pay a $1.5 million civil monetary penalty for aiding andabetting Binance's violations and engaging in activities outside of the U. S. to willfully evade orattempt to evade U.s. law.