Binance Holdings Ltd. the world’s largest crypto exchange by trading volume, has been sued by the U.S. Commodity Futures Trading Commission. Binance CEO Changpeng Zhao is named in the lawsuit, and the accusations allege that the crypto exchange broke several trading and derivatives rules. The lawsuit also names Samuel Lim, former chief compliance officer of Binance, who allegedly aided and abetted Binance’s violations.
CFTC sues Binance for willful evasion of federal law; CEO Changpeng Zhao named in lawsuit
CFTC ChargesThe CFTC filed suit against Binance for willful evasion of federal law, alleging that Binance operated an illegal digital asset derivatives exchange The CFTC filed the lawsuit in the U.S. District Court for the Northern District of Illinois. The regulators allege that Binance engaged in a calculated strategy of regulatory arbitrage for commercial gain.
The crux of the accusation stems from the fact that Binance allegedly offered commodity derivatives trading to U.S. residents from 2019 until today; under the direction of CEO Changpeng Zhao, Binance’s compliance program was ineffective, regulators reportedly emphasized in a statement.
The CFTC stated that “this action alleges that entities acting as futures commission merchants (FCMs) such as Binance, despite their legal obligation to collect such information, failed to require customers to provide identification information prior to trading on their platforms during the majority of the relevant time period, and failed to prevent and detect terrorist financing and money laundering, and failing to implement basic compliance procedures to prevent and detect money laundering,” the agency explained on Monday.
The CFTC noted that it is illegal to facilitate derivatives trading without registering with regulators. The regulator stressed that CEO Changpeng Zhao was responsible for these compliance failures; the CFTC stated:
Zhao has long been responsible for his control over Binance and his failure to act in good faith with respect to Binance’s fraudulent conduct. responsible for Binance’s violations based on his long-standing failure to act in good faith with respect to Binance’s misconduct.
Following this news, Bitcoin (BTC) sank below the $27,000 per unit range and the entire crypto economy lost 2.94% against the U.S. dollar The CFTC is requesting civil monetary penalties, a permanent trading and registration ban, and disgorgement .” CFTC Chairman Rostin Behnam said in a statement, “Today’s enforcement action demonstrates that there is no place, or lack of advocacy, that prevents the CFTC from protecting American investors.
“I have been clear that the CFTC will continue to use all of its authority to detect and stop abuses in the volatile and risky digital asset markets.” Behnam added. “For years, Binance has been actively engaged in both maintaining the flow of funds and evading compliance, knowing that it was in violation of the CFTC’s rules. This should serve as a warning to everyone in the world of digital assets that the CFTC will not tolerate willful circumvention of U.S. law,” the chairman concluded.
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