Statement of Chairman Rostin Behnam Regarding Binance and its Founder
November 21, 2023
Good afternoon. Thank you, Attorney General Garland, Treasury Secretary Yellen, Deputy Attorney General Monaco, and all of our law enforcement counterparts.
Today, the CFTC stands with the Department of Justice and the Treasury Department in protecting U.S. investors and financial markets from those who sought to create an empire through a calculated strategy of regulatory avoidance and arbitrage, outright defiance of the law, and breaching the fundamental principles of market behavior.
Today, the CFTC agreed to resolve charges against Binance, its founder and CEO, Changpeng Zhao, and its former chief compliance officer Samuel Lim. Binance is the world’s largest digital asset exchange and offers trading in spot digital assets and digital asset derivatives, including CFTC jurisdictional products such as bitcoin futures, options, and swaps. The proposed orders impose a civil monetary penalty and disgorgement totaling $2.7 billion against Binance, a $150 million civil monetary penalty against Zhao and a $1.5 million penalty against Lim.
Binance’s activities undermined the foundation of safe and sound financial markets by intentionally avoiding basic, fundamental obligations that apply to exchanges, all the while collecting approximately $1.35 billion in trading fees from U.S. customers. Beyond the risks imposed on the U.S. financial system, Binance’s activities impacted populations beyond investors in ways that cannot be measured in dollars and cents: as evidenced by the internal chats of Binance’s CCO and others, Binance recognized that its platform was used to facilitate criminal activity, including terrorist financing, but chose to turn a blind eye, all in the name of profits. Binance and its leaders sought to dupe and indoctrinate their employees and customers, building a cult-like following premised on circumventing their own compliance controls to maximize corporate profits above all else.
As charged in the CFTC complaint filed in March of this year, and set forth in the consent order, Binance made deliberate, strategic and calculated decisions to evade federal law over a period of nearly four years. Binance, under Zhao’s direction and control, knowingly solicited and accepted orders from US-based customers to trade digital asset commodity derivatives products and operated an exchange for the trading of futures, options, swaps, and leveraged retail commodity transactions. Throughout this time period, Binance never registered with the CFTC, as required under U.S. law.
The resolution of the action against Binance and Zhao—within just 8 months of its filing--solidifies the CFTC’s reputation as the proven leader in the civil enforcement space when it comes to digital assets. We are stalwart in ensuring CFTC registrants comply with our statute and regulations, which serve to protect broader financial health and that directly impacts millions of American investors.
Binance failed to diligently supervise its derivatives market activities and miscarried requirements to implement adequate Anti-Money Laundering, Know-Your-Customer, and Customer Identification programs required for certain CFTC registrants. These provisions serve to protect all Americans from those who seek to use the financial markets to facilitate criminal activities including domestic and international terrorism. As there remain certain classes of registrants who have lesser requirements, I believe our action here underscores what we could accomplish in CFTC markets with broader authority.
American investors, small and large, 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, and that illegal and illicit conduct is swiftly addressed. When, as here, an entity goes even further, deliberately avoiding to employ meaningful access controls, intentionally avoiding knowing customers’ identities, and actively concealing the presence of U.S. customers on its platforms, there is no question that the CFTC will strike hard and aggressively.
I want to commend the incredible work of Candy Haan, Joseph Platt, Katherine Paulson, Joseph Patrick, Matthew Edelstein, Elizabeth Pendleton, Scott Williamson, and Robert Howell. I would also like to acknowledge our Director of Enforcement Ian McGinley and Principal Deputy Director and Chief Counsel Gretchen Lowe.