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Binance Sees SEC Civil Action Dismissed Amidst Record AML Settlement

Binance civil action dismissed aml settlement

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The abrupt dismissal of the U.S. Securities and Exchange Commission’s (SEC) civil enforcement action against Binance in 2025 marks a watershed moment for crypto compliance, digital asset regulation, and the future trajectory of anti-money laundering (AML) enforcement worldwide. As one of the largest cryptocurrency exchanges globally, Binance has spent years under the microscope of regulators, particularly regarding its AML and compliance framework.

Launched in June 2023, the SEC’s lawsuit accused Binance Holdings Ltd., Binance.US, and founder Changpeng Zhao (often known as CZ) of violating federal securities laws by allegedly operating unregistered exchanges, broker-dealers, and clearing agencies, as well as offering and selling securities unlawfully. While that case dominated headlines for nearly two years, its sudden dismissal “with prejudice” in May 2025 has sparked intense debate in compliance circles and triggered wider reflection on regulatory strategy.

Yet, this dramatic legal development unfolded in the shadow of Binance’s landmark $4.3 billion AML-related settlement with U.S. federal agencies only months prior—a record-setting case that saw Zhao personally plead guilty to anti-money laundering failures. The juxtaposition of enforcement approaches raises pressing questions for the global crypto sector, compliance leaders, and policymakers alike.

Regulatory attention on Binance has always extended far beyond typical securities oversight, cutting to the heart of money laundering risks and the broader vulnerabilities of the digital asset ecosystem. The SEC’s civil complaint, while primarily rooted in securities law, was closely watched by AML and compliance professionals because it addressed issues of transparency, customer vetting, and operational oversight—core elements of any anti-financial crime framework.

Key Timeline:

March 2023: The Commodity Futures Trading Commission (CFTC) filed suit against Binance, Zhao, and other executives, alleging “willful evasion of U.S. law” and failures to implement effective controls to prevent money laundering and terrorist financing.
June 2023: The SEC filed its own sweeping lawsuit, accusing Binance of creating “an extensive web of deception” and evading investor protection rules. Among its allegations: Binance commingled customer and corporate funds and obfuscated beneficial ownership—classic hallmarks of money laundering typologies.
November 2023: Binance agreed to pay $4.3 billion in penalties and forfeitures to the U.S. Department of Justice (DOJ), the Treasury’s Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC), after being charged with conspiring to operate an unlicensed money transmitting business and violating the Bank Secrecy Act (BSA).

According to court documents from the DOJ case (United States v. Binance Holdings Ltd., Case 3:23-cr-00599), Binance’s compliance failures included not reporting over 100,000 suspicious transactions tied to designated terrorist groups such as Hamas, Al Qaeda, and ISIS. The settlement required Binance to adopt sweeping compliance upgrades, including appointing an independent monitor for three years and strengthening customer due diligence.

Global Compliance Ripple Effects and Regulatory Fallout

Binance’s U.S. regulatory saga reverberated worldwide. The exchange has repeatedly faced scrutiny and penalties from multiple jurisdictions for alleged AML violations and insufficient customer vetting.

Netherlands: In June 2023, Binance was denied a virtual asset service provider (VASP) license by De Nederlandsche Bank (DNB) due to failures in AML controls, forcing an abrupt exit from the Dutch market (DNB source).
France: By mid-2023, French prosecutors opened a probe into Binance for suspected “aggravated money laundering,” citing concerns over the exchange’s role in converting and concealing criminal proceeds (French Ministry of Justice source). The investigation focused on alleged failures to monitor suspicious flows and report them as required under French law.
United Kingdom: The Financial Conduct Authority (FCA) in October 2023 blocked Binance’s chosen partner, Rebuildingsociety.com, from approving financial promotions, after determining that it lacked the requisite authorization. This restriction reflected a wider FCA clampdown on unauthorized crypto marketing and weak AML practices (FCA statement).

These developments exposed a pattern: while Binance often promised robust compliance upgrades, regulators across Europe, North America, and Asia flagged persistent deficiencies in its AML programs, know-your-customer (KYC) procedures, and suspicious activity monitoring.

AML Failures at the Core of Binance’s Legal Troubles

At the heart of nearly every enforcement action or regulatory setback faced by Binance has been a common set of AML and compliance shortcomings. U.S. federal filings, public enforcement notices, and settlement agreements offer a granular look into the specific failures.

Notable compliance failings cited:

Customer Due Diligence (CDD): According to FinCEN, Binance routinely permitted high-risk, pseudonymous transactions without adequate KYC checks, including transactions linked to sanctioned jurisdictions and criminal organizations.
Transaction Monitoring: DOJ records detail that Binance lacked automated transaction monitoring to identify patterns consistent with layering and structuring—techniques frequently used to obscure the origins of illicit funds.
Suspicious Activity Reporting (SAR): The exchange did not file SARs on hundreds of thousands of potentially illicit transactions, a direct violation of the BSA and equivalent international standards.

These failures did not go unnoticed internationally. For example, Japan’s Financial Services Agency (FSA) issued public warnings about Binance’s unregistered operations, specifically referencing money laundering risks in its March 2023 notice (FSA source).

Why Did the SEC Drop Its Civil Case Against Binance?

Given this context, the SEC’s decision to dismiss its civil enforcement action against Binance in May 2025 caught many industry observers by surprise. The dismissal, filed jointly with Binance and its founder, came “with prejudice,” meaning the case cannot be refiled. The SEC’s litigation release, dated May 2025, noted: “The Commission’s decision to seek dismissal of this litigation does not necessarily reflect the Commission’s position on any other litigation or proceeding.”

This phrasing reflects a carefully negotiated exit, likely driven by evolving enforcement priorities and legal strategy. Several factors may have contributed to this decision:

Global Settlements Already Achieved: The record-setting DOJ, FinCEN, and OFAC settlements addressed the most egregious compliance failures, with massive penalties and a stringent independent monitoring regime. From a resource perspective, pursuing a parallel SEC civil action may have been deemed duplicative.
Changing Regulatory Leadership: The U.S. regulatory landscape has shifted significantly since 2023. New SEC leadership may be prioritizing forward-looking rulemaking over protracted litigation, especially after public criticism of “regulation by enforcement.”
Legal Uncertainty Over Crypto Asset Classification: The courts have yet to definitively resolve whether various crypto assets traded on Binance qualify as securities under U.S. law—a core issue at the center of the SEC’s original complaint. Ongoing appeals and conflicting rulings have increased litigation risk for the regulator.

Despite the dismissal, the SEC was careful to clarify that this outcome “does not necessarily reflect the Commission’s position on any other litigation,” signaling ongoing vigilance over digital asset platforms.

The Aftermath: Binance’s Compliance Overhaul and Industry Impact

Even with the SEC’s case dropped, Binance’s compliance journey is far from over. The exchange remains under the watchful eye of U.S. federal monitors, faces ongoing investigations in several jurisdictions, and is under intense scrutiny to deliver on its compliance promises.

Leadership Change: Following the DOJ settlement, Richard Teng took over as CEO, pledging a new era of regulatory cooperation and transparency.
Monitorship: Binance’s settlement with the DOJ requires a court-appointed independent monitor to review the company’s compliance with AML, KYC, and sanctions regulations over three years, with detailed reporting obligations.
Global Regulatory Adaptation: Binance is actively applying for new licenses and updating its AML controls across the EU, Middle East, and Asia-Pacific regions, aiming to regain regulatory approval and market access.

The broader crypto sector has taken note, with many exchanges now accelerating efforts to implement automated transaction monitoring, strengthen customer onboarding, and increase transparency with regulators. International standard-setters like the Financial Action Task Force (FATF) continue to urge stronger AML requirements for virtual asset service providers, reinforcing the message that compliance cannot be optional in digital finance .

Conclusion: Lessons for the Future of Crypto Compliance

The dismissal of the SEC’s civil enforcement action against Binance signals a potential shift in U.S. regulatory posture but does not absolve the exchange—or the wider crypto industry—from the necessity of rigorous AML and compliance practices. Binance’s journey, marked by record-breaking settlements and sweeping compliance reforms, offers a powerful lesson: global regulators expect nothing less than full transparency and robust controls from virtual asset platforms.

For compliance leaders, the case underscores the risks of inconsistent controls, the power of international regulatory cooperation, and the mounting pressure to harmonize standards worldwide. As digital assets mature, so too must the industry’s approach to financial crime risk, customer due diligence, and proactive engagement with regulators.

Whether this episode marks the dawn of a new regulatory approach or merely a brief pause in enforcement remains to be seen. What is clear, however, is that anti-money laundering vigilance—and the demand for operational excellence in compliance—will define the next chapter for Binance and the global digital asset sector.