The world’s largest cryptocurrency exchange by trading volume, Binance Holdings Ltd., has been sued by the US Commodity Futures Trading Commission. Binance CEO Changpeng Zhao has been named in the lawsuit and the charges claim that the crypto exchange violated various trading and derivatives rules. The lawsuit also names former Binance chief compliance officer Samuel Lim for allegedly aiding and abetting Binance’s violations.
CFTC Accuses Binance of Willful Evasion of Federal Law; CEO Changpeng Zhao named in lawsuit
The CFTC has loaded Binance with willful evasion of federal law, as the regulator insists Binance operated an illegal digital asset derivatives exchange. The CFTC filed the lawsuit in the US District Court for the Northern District of Illinois. The regulator claims that Binance engaged in a calculated strategy of regulatory arbitrage for its trading benefit.
The crux of the charges stem from Binance allegedly offering commodity derivatives transactions to US residents from 2019 to today. Under the direction of CEO Changpeng Zhao, Binance’s compliance program has been ineffective, the regulator emphasized in a press release.
“The complaint alleges that for much of the relevant period, Binance did not require its clients to provide any identity verification information before trading on the platform, despite a legal duty for entities like Binance that function as commission merchants. (FCM) collect such information. , and failed to implement basic compliance procedures designed to prevent and detect terrorist financing and money laundering,” the CFTC explained Monday.
The CFTC notes that facilitating derivatives transactions without registering with the regulator is illegal. The regulator stressed that CEO Changpeng Zhao is responsible for such compliance failures. The CFTC stated:
Zhao is responsible for Binance’s violations based on his control over Binance and his prolonged failure to act in good faith regarding Binance’s misconduct.
Following the news, the entire crypto economy lost 2.94% against the US dollar with bitcoin (BTC) sinking below the $27,000 per unit range. The CFTC seeks civil money penalties, permanent trading and registration bans, and remand. “Today’s enforcement action demonstrates that there is no location, or the alleged lack of location, that will prevent the CFTC from protecting US investors,” CFTC Chairman Rostin Behnam said in a statement.
“I have made it clear that the CFTC will continue to use all its authority to find and stop misconduct in the volatile and risky digital asset market,” Behnam added. “For years, Binance knew that he was violating CFTC rules, actively working to both keep money flowing and avoid compliance. This should be a warning to anyone in the world of digital assets that the CFTC will not tolerate deliberate evasion of US law,” the president concluded.
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