Legal Challenges Facing Binance Exchange
- CFTC (March 2023): Alleged Binance solicited U.S. customers without registering as a futures commission merchant and failed to implement effective compliance controls.
- SEC (June 2023): Charged Binance entities and leadership with operating unregistered exchanges, broker-dealers, and clearing agencies while offering unregistered securities tokens.
- U.S. Department of Justice (November 2023): Reached a $4.3B settlement covering Bank Secrecy Act, sanctions, and unlicensed money transmission violations. Changpeng Zhao pled guilty to BSA violations and resigned as CEO.
- Financial Crimes Enforcement Network (FinCEN): Implemented a five-year monitorship requiring Binance to report suspicious activity and enhance AML programmes.
- Global Watchlists: Several jurisdictions (UK FCA, Japan FSA, Ontario OSC, Singapore MAS) issued consumer warnings or restricted local operations pending registration outcomes.
Remediation Commitments
- Expanded know-your-customer (KYC) requirements and travel-rule reporting across major regions.
- Implemented compulsory proof-of-address for new and legacy accounts.
- Introduced real-time transaction monitoring with external analytics vendors.
- Transitioned to jurisdiction-specific entities (e.g., Binance France, Binance Kazakhstan) to pursue licencing.
- Appointed Richard Teng as CEO and established a global board with enhanced governance oversight.
Considerations for Users and Partners
- Expect tighter withdrawal monitoring, transaction limits, and more frequent requests for source-of-funds information.
- Review updated terms of service to understand dispute resolution, custodial segregation, and rehypothecation clauses.
- Diversify custody: hold only trading inventory on exchanges and keep treasury assets in self-custody or qualified custodians.
- Track consent orders and monitorship reports; remediation lapses can trigger additional penalties or suspensions.
Compliance Reminder
This article summarises public enforcement actions as of 2023–2024. It is not legal advice. Always consult qualified counsel and compliance professionals before engaging Binance or any other virtual-asset service provider.