How much was Binance fined by the United States?

Despite the episode of Zhao Changpeng being detained in the United States, many people thought that the Binance settlement case was over amid the overwhelming information of the huge fine of "US$4.3 billion" until December 18.

The U.S. CFTC issued an announcement on its official website on the same day that the U.S. District Court for the Northern District of Illinois had approved the settlement agreement between the CFTC, Binance and Changpeng Zhao announced on November 21, 2023. The CFTC ended its enforcement actions after Binance and Changpeng Zhao paid US$2.85 billion to the CFTC.

A careful study revealed that the $2.85 billion in the CFTC’s settlement agreement on November 21 was actually submerged in Binance’s huge $4.3 billion fine settlement information on the same day.

Amid all the noise, no one seems to have seriously investigated how much money Binance was fined by the US government.

Let’s go back and take a closer look at the text of the settlement agreement between the U.S. CFTC, the U.S. Treasury Department (FinCEN, OFAC), and the U.S. Department of Justice.

A breakdown of the CFTC’s $2.85 billion settlement

The $2.85 billion CFTC settlement includes:

1. $1.35 billion: Binance “disgorges” ill-gotten trading fees

2. $150 million: Civil penalty against Changpeng Zhao

3. $1.35 billion: Civil penalties

According to the CFTC's settlement documents, the CFTC will receive $2.85 billion, but the CFTC did not specify the credit for the $2.85 billion .

US Treasury Department's $4.368 billion fine

According to information released by the U.S. Treasury Department, the U.S. Treasury Department mainly has two departments, FinCEN and OFAC, involved in the settlement case with Binance.

Among them, FinCEN imposed a civil penalty of US$3.4 billion and OFAC imposed a fine of US$968 million.

FinCEN's $3.4 Billion Civil Penalty Awarded

Of FinCEN's $3.4 billion civil penalty, the U.S. Department of Justice (DOJ) and CFTC received $2.47 billion; the U.S. Department of the Treasury (DOT) received $780 million, and FinCEN also received a $150 million suspended fine, which FinCEN will collect if Binance fails to comply with the required compliance commitments and regulatory terms.

Source: FinCEN Binance Enforcement Action P59

OFAC $968 million attribution

Of the $968 million fine imposed on OFAC, OFAC will receive $898 million and the U.S. Department of the Treasury (DOT) will receive $70 million.

Source: OFAC Binance Settlement Document P5

Note that the $898 million in the chart above should be considered Binance’s obligation under its plea agreement with the U.S. Department of Justice. This amount is the same as the amount in Binance’s plea agreement with the Department of Justice.

break down:

43.68 = 34 (FinCEN civil penalty) + 9.68 (OFAC settlement amount)

34 = 9.3 (FinCEN 1.5 suspension + Treasury 7.8) + 24.7 (DOJ and CFTC)

9.68 = 8.98 (OFAC) + 0.7 (Treasury Department)

Because the $150 million is a suspended fine, the money will only be triggered if Binance fails to comply with the required compliance commitments and regulatory terms.

Therefore, according to the settlement documents between the Treasury Department and Binance, the total settlement amount is 4.368-1.5=4.218 billion US dollars, of which the US Treasury Department (including all agencies of FinCEN and OFAC) will receive 1.748 billion US dollars, and the Department of Justice and CFTC will share the remaining 2.47 billion US dollars.

US Department of Justice $4.36 billion breakdown

According to the news released by the U.S. Department of Justice, Binance agreed to forfeit $2,510,650,588 and pay a criminal fine of $1,805,475,575, for a total fine of $4,316,126,163. Together with the $50 million fine imposed on Zhao Changpeng, the total fine is $4.36 billion.

How to allocate the $1.805 billion criminal fine

Source: Binance U.S. Department of Justice Plea Agreement P13

Of the $1.805 billion criminal fine, the CFTC received $950 million (CFTC Credit) and the U.S. Treasury Department (FinCEN or OFAC) received $850 million.

1.8 billion (criminal fine) = 950 million (CFTC) + 850 million (FinCEN/OFAC)

How to allocate the $2.51 billion in confiscated funds?

Source: Binance U.S. Department of Justice Plea Agreement P15

Of this, $1.612 billion came from transaction fees from U.S. users; $898.6 million came from transactions with sanctioned countries such as Iran, which is the $898 million received by OFAC in the subsection "Attribution of the U.S. Treasury Department's $968 million OFAC fine."

2.51 billion (confiscation) = 1.612 billion (unjust enrichment transaction fees) + 898 million (OFAC)

break down:

43.6 = 18 (criminal fine) + 25.1 (confiscation) + 0.5 (Zhao Changpeng’s personal fine)

18=9.5(CFTC)+8.5(FinCEN/OFAC)

25.1 (confiscation) = 16.12 (unjust enrichment from transaction fees) + 8.98 (OFAC)

According to the settlement documents of the U.S. Department of Justice, the total settlement amount is $4.36 billion, of which the U.S. Treasury Department (including all agencies of FinCEN and OFAC) will receive $1.7486 billion, $950 million will be clearly allocated to CTFC, and the remaining $1.612 billion has not been clearly allocated.

Conclusion

Comparing the settlement documents of the three law enforcement departments against Binance, we can find that:

1. The settlement amounts of the three departments do not match: the U.S. Treasury’s settlement amount is $4.218 billion, the U.S. Department of Justice’s settlement amount is $4.36 billion, and the CFTC’s settlement amount is $2.85 billion;

2. According to documents from the Ministry of Finance and the Ministry of Justice, the U.S. Treasury received the same amount, about $1.748 billion ;

3. According to the documents of the Ministry of Justice, after deducting the $1.748 billion allocated to the U.S. Treasury and the $950 million allocated to the CFTC, there is still $1.612 billion left, but it is not clear to whom;

4. According to CFTC documents, Binance will pay CFTC $2.85 billion, exceeding the maximum amount that can be allocated to CFTC in the Treasury and Justice Department documents;

5. The CFTC document did not mention the ownership of the $2.85 billion. Now the court has approved the CFTC's settlement agreement. According to the Treasury Department's document, the Department of Justice and the CFTC will share a total of $2.47 billion.

6. Due to the conflicts in the settlement documents between the three government departments, the specific amount of Binance’s settlement cannot be determined for the time being ; but it is obvious that Binance has become a fish on the chopping board, the US government has broken its promise, and Zhao Changpeng has been detained.

7. Binance has signed and agreed to the settlement documents of these three companies. They may all strive for their own best interests, so it is understandable that the CFTC has the court to pass its own settlement agreement first;

8. The amount that has been confirmed is US$4.598 billion (US$1.748 billion from the U.S. Treasury Department + US$2.85 billion from the CFTC), which has exceeded the US$4.3 billion reported in the "news" in November, and the amount divided by the U.S. Department of Justice has not yet been included.

9. All settlement documents have a punitive clause that states “if the offense is repeated, the penalty will be increased.” The United States is also well-known for its “fishing enforcement” tactics.

So, Binance now seems to be a golden goose for the US government.

"Plucking the feathers while preventing the geese from clamoring" and "harvesting once enough has accumulated" may be the best strategies of the US government.