(Bloomberg) -- Binance is closing a loophole in a program that allowed prime brokerages on the platform to garner additional revenues at the expense of the world’s biggest crypto exchange. 

The company is making changes effective July 1 to Link Plus, an interface that allows prime brokers to manage accounts for institutional clients, according to a spokesperson. Several firms had taken advantage of Link Plus to offer clients fee rebates their trading volumes would normally not have entitled them to, people with knowledge of the matter said. 

Binance’s move may hurt revenues at many prime brokers, three of the people said, asking not to be named discussing sensitive information. In addition to the ability to dangle attractive commissions to lure customers, Link Plus gave such firms an opportunity to pocket additional income as the result of a nine-tiered fee structure Binance uses, according to the people. 

“Since last year we have notified companies on the Link Program that we will implement enhanced compliance standards and changes to align our fee structure for Link end-users to ensure transparency and fairness,” the Binance spokesperson said in an emailed statement on Thursday. 

“Binance understands that these changes may impact some intermediaries but our priority remains to our users and our commitment to uphold compliance and a level-playing field.”

The exchange’s top “VIP 9” tier offers users who trade at least $4 billion per month on Binance fees as low as a tenth of those regular customers get, according to Binance’s website. Since they trade on behalf of many different clients, it’s common for prime brokers attain that tier by what’s known in the industry as “bundling” accounts.

VIP Customers Complain

Here’s how prime brokers have been able to take advantage of Link Plus until now, according to the people familiar: 

• Because they handle many sub-accounts, prime brokers could offer, for example, a VIP 3 customer to trade at VIP 5-level fees
• A prime broker might trade on behalf of a customer using its own VIP 9 tier while charging the customer, say, VIP 3-level fees and then pocket the difference

Some VIP customers have complained to Binance that the Link Plus system provided prime brokers with an unfair advantage, one person with direct knowledge of the matter said. 

The changes to Link Plus will tie clients of prime brokers directly to the tier status their trading volumes on Binance entitle them to. Binance is also removing the ability to bundle client accounts, the spokesperson said, meaning some prime brokers will likely lose their top-tier status.  

Bequant, a Malta-incorporated crypto trading firm, is pivoting to focus on principal trading because its prime business was oriented around arbitraging Binance’s fee tiers, Chief Executive Officer George Zarya said in an interview. 

In a separate statement on Thursday, Binance said it will restrict the misuse of account features that give some users an advantage on the platform. That push isn’t directly connected to the overhaul of the Link Plus interface, the Binance spokesperson said. 

Zhao’s Prison Sentence

Binance pleaded guilty to violating US anti-money-laundering and sanctions laws in November and agreed to pay a landmark $4.3 billion penalty. Co-founder Changpeng Zhao agreed to step down as CEO and was later sentenced to four months in prison. 

Since the plea deal was announced, the exchange has tightened its listing requirements for new tokens, taken additional steps to ensure US investors don’t trade on the platform and spun off its venture capital arm. 

Two monitors appointed by US regulators, Sullivan & Cromwell and Forensic Risk Alliance, recently began working at the firm, Binance CEO Richard Teng said in an interview this month. 

--With assistance from Justina Lee.

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