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CFTC Sues Binance, CEO CZ for Allegedly Breaking US Laws

by BSC News

March 27, 2023

chain

The U.S. commodities regulator accuses Binance and CEO CZ of ‘willful evasion’ of US federal law.

CFTC Sues Binance

The U.S. Commodity Futures Trading Commission has sued Binance and CEO Changpeng Zhao (CZ), alleging that the world’s largest cryptocurrency Centralized Exchange committed “numerous violations” of U.S. laws.

The civil complaint was filed in the U.S. District Court for the Northern District of Illinois on Monday, March 27.

According to a press release announcing the filing, the CFTC alleges that Binance “chose to knowingly disregard applicable provisions of the [Commodity Exchange Act (CEA)] while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit.”

The derivatives markets regulator is also accusing former Chief Compliance Officer Samuel Lim of aiding and abetting the alleged illegal activity.

The CFTC is seeking monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the law.

“Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market,” CFTC Chairman Rostin Behnam said. “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”

Honing in on Binance’s “commodity derivatives transactions to and for U.S. persons,” the 74-page complaint contains numerous allegations and assertions about Binance, including references to what CFTC says are excerpts from Binance’s internal company chat messages.

“Defendants’ alleged willful evasion of U.S. law is at the core of the Commission’s complaint against Binance. The defendants’ own emails and chats reflect that Binance’s compliance efforts have been a sham and Binance deliberately chose – over and over – to place profits over following the law,” said Gretchen Lowe, CFTC’s Enforcement Division Principal Deputy Director and Chief Counsel.

The complaint’s allegations against Binance include:

  • Shortcomings in compliance controls (some deliberate)
  • Lack of KYC verification
  • Failure to implement basic measures to prevent terrorist financing and money laundering
  • Deliberately assisting U.S. VIP customers on how to evade compliance controls
  • Failure to register with the CFTC.

The complaint also accuses Binance et al of intentionally structuring entities to avoid U.S. registration requirements.

The complaint singles out CZ for allegedly “devising the secret plot to instruct U.S.-based VIP customers to evade Binance’s compliance controls and instructing Binance employees to ensure all communications about their control subversion took place over applications that facilitated the automatic destruction of evidence,” according to the CFTC press release.

After news broke of the suit’s filing, CZ tweeted a one character response: “4”.

That’s a reference to his New Year’s resolution to “Ignore FUD, fake news, attacks etc.”

The CFTC’s action against Binance occurs amidst a period of regulatory uncertainty in the U.S., when the U.S. Securities and Exchange Commission has attempted to also take on an increasingly active role in regulating cryptocurrencies.

What is Binance:

Binance positions itself as the world’s leading blockchain ecosystem and crypto-asset infrastructure provider with a financial product suite that includes the largest digital asset exchange by volume. The Binance platform aims to increase the freedom of money for users and features a comprehensive portfolio of crypto-asset products and offerings, including trading and finance, education, data and research, social good, investment and incubation, decentralization, and infrastructure solutions.

Where to find Binance:

Website | Twitter | Discord | Telegram |

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