Binance and founder Changpeng Zhao are sued by the CFTC for allegedly violating trading rules.
The US Commodity Futures Trading Commission (CFTC) filed a complaint against cryptocurrency exchange Binance and its co-founder, Changpeng Zhao, in Illinois federal court on March 27, alleging that Binance manipulated US users and failed to comply with the exchange’s own rules, according to the filing.
The lawsuit has the potential to disrupt the operations of the exchange and could be just the first step in the US tightening of the operations of the world’s largest cryptocurrency exchange. Just days before the CFTC filed, CNBC reported on how Binance employees circumvented the exchange’s compliance controls in China.
The regulator alleges that Binance and Zhao violated eight core provisions of the Commodity Exchange Act, including laws “designed to prevent and detect money laundering and terrorist financing.”
Zhao and a former legal official at Binance, Samuel Lim, are accused of “actively attracting lucrative and commercially important ‘VIP’ customers, including institutional customers, in the US”, the petition said. complaint said.
The regulator said that Binance and Zhao have taken steps to intentionally obscure the location of the exchange’s subsidiaries.
The CFTC notes that as of May 2021, Binance’s monthly revenue earned is $1.14 billion from derivatives trading, up from $63 million in August 2020. Among them, about 16% of Binance accounts are held by US customers.
Zhao and other stakeholders in Binance’s senior management “failed to properly monitor Binance’s activities and, in fact, actively facilitated violations of U.S. law, including both assisting and instructing customers in the US to evade the compliance controls that Binance intends to implement to prevent and detect violations of US law,” according to the filing.
Since 2021, the CFTC has been investigating Binance for whether the exchange prevented Americans from buying and selling derivative cryptocurrencies. CFTC rules generally require platforms to register with the agency if they are to allow Americans to trade these products.
The CFTC is just one of several US agencies that are investigating Binance’s activities. According to Bloomberg, the Internal Revenue Service (IRS), as well as federal prosecutors, have been examining Binance’s compliance with anti-money laundering rules. Additionally, the US Securities and Exchange Commission has also scrutinized whether Binance supports trading in unregistered securities.
According to Bloomberg, this is the largest legal move by the US regulator to Binance to date. CNBC assessed that this could upset Binance’s operations, but it is only the first step in a series of activities aimed at a regulatory crackdown on the world’s largest cryptocurrency exchange. A spokesperson for Binance called the lawsuit “unexpected and disappointing”, claiming that the platform has made significant investments to “ensure no active US users” over the past two years.
On Twitter, CEO CZ posted a brief message with the number 4, reiterating a message he gave earlier this year, urging users to ignore negative information, fake news, or offensive actions.