On December 19, the Commodity Futures Trading Commission (CFTC) Whistleblower Office posted a Notice of Covered Action (NCA) for the agency’s historic $2.85 billion settlement with Binance and its former CEO Changpeng Zhao.
The NCA signals that the agency is now accepting whistleblower awards claims for the case. Through the CFTC Whistleblower Program, qualified whistleblowers, individuals who voluntarily provide original information which leads to a successful enforcement action, are entitled to monetary awards of 10-30% of the funds collected in the action.
The largest award ever issued by the CFTC Whistleblower Program was a $200 million award issued in 2021. Overall, the program has awarded more than $350 million to whistleblowers since it was established in 2010.
The CFTC charged Binance and Zhao with willful evasion of federal law and operating an illegal digital asset derivatives exchange. According to the CFTC, “Zhao and Binance implemented a business strategy of willful non-compliance with the CEA, among other laws, because they believed they would make more money if they did not follow applicable laws.”
“Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market,” said CFTC Chairman Rostin Behnam in a press release announcing the settlement. “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”
In recent years, the CFTC and its whistleblower program have increased their focus on cryptocurrency and digital asset fraud. In the 2023 Fiscal Year, a majority of the record 1,530 whistleblower tips received by the program related to crypto fraud.
“The majority of the tips received this year involved crypto—an area that continues to have pervasive fraud and other illegality,” said CFTC Commissioner Christy Goldsmith Romero. “With the rise of crypto, more retail customers have come under the CFTC’s jurisdiction, making even more critical the efforts of the CFTC’s Whistleblower Program.”
Alongside the CFTC’s charges, the U.S. 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 settled charges against Binance and Zhao. In total, Binance and Zhao agreed to pay U.S. authorities over $4 billion
In its press release, the Treasury Department explains that Binance’s money laundering and sanctions violations involved violations of the Bank Secrecy Act (BSA) and multiple sanctions programs. “The violations include failure to implement programs to prevent and report suspicious transactions with terrorists — including Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad (PIJ), Al Qaeda, and the Islamic State of Iraq and Syria (ISIS) — ransomware attackers, money launderers, and other criminals, as well as matching trades between U.S. users and those in sanctioned jurisdictions like Iran, North Korea, Syria, and the Crimea region of Ukraine,” the release explains. “By failing to comply with AML and sanctions obligations, Binance enabled a range of illicit actors to transact freely on the platform.”
Binance’s sanctions and money laundering violations are covered under the AML Whistleblower Program, which, like the CFTC program, offers monetary awards to qualified whistleblowers. Furthermore, under the CFTC Whistleblower Program’s related action rules, qualified CFTC whistleblower are entitled to monetary awards for sanctions collected by other agencies if their whistleblower disclosure to the CFTC aided the other agencies’ actions.
Further Reading:
Binance’s Historic $4 Billion Settlement Covered Under Multiple Whistleblower Award Programs
