The CFTC’s complaint details how the firm allegedly offered unregistered commodity derivatives to US clients.
The Commodity Futures Trading Commission sued Binance, the world’s largest cryptocurrency exchange by volume, and its CEO Changpeng Zhao, alleging that the company offered to sell unregistered derivatives to clients in the United States.
the demand alleges various violations of CFTC regulation, including “offering, entering into, confirming execution, or dealing in off-exchange commodity futures transactions,” “operating a swap processing or trading facility without being registered as a swap execution facility (“SEF”) or designated as a contract exchange”, “failure to diligently monitor Binance’s activities related to conduct that subjects Binance to Commission registration requirements” and “failure to implement a effective customer information program and otherwise comply with applicable provisions of the Bank Secrecy Act.”
These violations, among others, were concealed within the company’s operations, which the lawsuit claims was “designed to conceal ownership, control, and location of the Binance platform.”
According to the lawsuit, the court must hold Binance accountable, otherwise Binance is likely to continue to engage in the acts and practices alleged in this lawsuit and similar acts and practices.
The lawsuit featured alleged internal messages from Signal indicating that the company knew of its wrongdoing and encouraged practices within the platform.
2023 has had major regulatory challenges for Binance; in January, USA Senators launched an investigation in alleged criminal activity in which the platform participated. Furthermore, the Justice Department confirmed that it was split on its decision to charge Binance and its executives, with reports indicating that Justice Department officials had discussed potential plea deals with Binance lawyers.
However, it seems that it was simply a matter of time before Binance was charged by some regulatory entity. The SEC has recently stated its position that cryptocurrencies outside of bitcoin are securities, with a newsletter notice published recently describing that “those who offer crypto asset investments or services may not comply with applicable law, including federal securities laws.” Quite timely, SEC Chairman Gary Gensler today reiterated that “investors in crypto markets are putting their assets at risk in a highly speculative asset class.”
Formerly Gensler commented that “everything that is not Bitcoin is a security”, at least quelling fears that Bitcoin could be involved in potentially future regulation.
