Don’t overlook this detail in the settlement announced Tuesday against Binance and its chief executive officer: the cryptocurrency exchange’s former chief compliance officer is also looking at a $1.5 million penalty and severe restrictions on any future compliance career he might want to have.
The Commodity Futures Trading Commission, which gets a piece of the Binance action because cryptocurrency trades as a commodity, announced its proposed settlement with the company’s former chief compliance officer Samuel Lim on Tuesday, while we were all busy digesting the settlement against Binance (guilty plea, $4 billion penalty) and its CEO Changpeng Zhao (also a guilty plea, looking at 18 months in prison).
The CFTC settlement with Lim is only a proposed consent order; it still needs final approval from a federal judge, and we don’t have a copy of the text. But Lim apparently has agreed to the proposed terms.
Those terms include the $1.5 million fine, plus a permanent ban against Lim willfully evading CFTC rules in the future. That includes (emphasis added) …
directly or indirectly, acting as an unregistered futures commission merchant; operating an illegal digital asset derivatives exchange; and failing to have adequate know-your-customer compliance controls among other illegal activities described in the proposed order.
In other words, if Lim continues to work as a chief compliance officer somewhere else and that firm has another compliance failure, he’s a sitting duck for CFTC enforcement.
Before anyone starts hyperventilating about CCOs being held accountable for compliance failures, regulators have said all along that Lim was just as involved as Zhao in concocting a toothless compliance program and allowing users to evade U.S. anti-money laundering laws. The CFTC filed a 74-page lawsuit against Binance, Zhao, and Lim earlier this year, with some truly astonishing claims. CFTC officials minced no words about Lim’s misconduct this week, either.
“We take seriously the role corporate gatekeepers play in maintaining integrity in the markets we regulate, including digital asset markets,” CFTC director of enforcement Ian McGinley said in a statement. “Chief compliance officers should take note of today’s proposed order: If your compliance program is merely ‘for show’ and is intentionally ineffective, the CFTC will hold you accountable for facilitating illegal conduct.”
As a bonus, even Republican CFTC commissioner Caroline Pham released a statement declaring that while she generally believes compliance officers should only face charges in the most limited of circumstances, Lim’s behavior does fit that description.
“I believe that the alleged facts involving egregious personal conduct demonstrate that the defendant employee was compliance in name only,” Pham said. “I also believe that these charges emphasize the critical necessity of having a robust compliance program that is adequately resourced with personnel that have the requisite character, expertise, and experience. I support sending this strong message to the crypto asset sector, which has all too often demonstrated material weaknesses in both their compliance programs and their risk management programs.”
There you have it, folks. When even Republican officials want to hold corporate executives accountable for misconduct, you know the accusations are bad.
As for Lim, he was Binance’s CCO from from 2018 until 2022, when he first went on administrative leave and then flew the coop entirely. It’s not clear where he currently lives, although earlier this year regulators believed he was living in Singapore (even though Binance declined to provide a home address for him so the CFTC could issue a subpoena). My attemps to connect to him on LinkedIn have so far been unsuccessful.