Binance sued by CFTC

The CFTC today filed a 74-page complaint against Binance in the US District Court for the Northern District of Illinois. It claims that the company is participating in jurisdictional arbitration to offer commodity trading services to its US clients.

regulatory arbitration

Binance is in hot water with regulators again.

Today, the United States Commodity Futures Trading Commission defendant the world’s leading crypto exchange and its CEO, Changpeng “CZ” Zhao, for their alleged numerous violations of the Commodity Exchange Act and CFTC regulations.

According to the regulator, Binance deliberately ignored CEA provisions by engaging in regulatory arbitrage strategies, meaning the firm circumvented US law and restrictions by relying on friendlier jurisdictions. While Binance was originally founded in China, the company currently does not have an official headquarters anywhere.

“Today’s enforcement action demonstrates that there is no location, or alleged lack of location, preventing the CFTC from protecting US investors,” saying CFTC Chairman Rostin Behnam in a press release. “For years, Binance knew that he was violating CFTC rules, actively working to both keep money flowing and avoid compliance.”

The CFTC alleges that Binance has been illegally providing commodity trading services to US clients since 2019. Interestingly, the regulator explicitly named BTC, ETH, and LTC among these commodities. However, Securities and Exchange Commission Chairman Gary Gensler claimed in February that all cryptocurrencies other than Bitcoin were a security.

The CFTC further claimed that Binance had instructed US employees and clients on how to circumvent the exchange’s compliance checks. The agency is seeking remand, civil money penalties, permanent trading and registration bans, and a permanent injunction against further commodity law violations.

Disclaimer: At the time of writing, the author of this article owned BTC, ETH, and various other crypto assets.