Binance sued by CFTC news shook the crypto world. So why is the CFTC charging Binance?
The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance CEO Changpeng Zhao and his cryptocurrency empire, alleging that they violated US trading and derivatives laws. The agency claims that Binance helped US traders access its platform, despite it not operating in the US.
The complaint, filed on Monday, accuses Binance of having an “ineffective compliance program” and “knowingly” breaking the law. The lawsuit also charges Binance’s former chief of compliance, Samuel Lim, for allegedly “aiding and abetting Binance’s violations through intentional conduct that undermined Binance’s compliance program”.
Internal conversations brought to light by a report from The Wall Street Journal earlier this month are also addressed in the lawsuit. The report alleged that Binance instructed its customers in the US to use virtual private networks (VPNs) to hide their locations in order to trade on the platform. Binance.US, which operates as a separate entity, is the platform through which Binance’s US customers access its services.
Binance sued by CFTC and Zhao has to protect his empire
Binance’s response to the lawsuit was a post on the company’s blog in which Zhao said that “the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint”. However, the response to Binance sued by CFTC news on the blog did not contain specific denials of the lawsuit’s claims.
The lawsuit reflects a broader federal crackdown on cryptocurrency in the wake of FTX’s collapse. Binance had previously offered to bail out FTX, but Zhao retracted that offer the next day. FTX then filed for bankruptcy, which shook investors who pulled their money out of FTX. Last year, the Federal Trade Commission began investigating various crypto firms for possible misconduct.
Additionally, the Securities and Exchange Commission slapped the Kraken crypto exchange with a $30 million fine for allegedly selling unregistered securities in February, and last week, the SEC sued Tron founder Justin Sun for his crypto schemes along with the eight celebrities he paid to promote them.
“Binance’s reliance on a maze of corporate entities to operate the Binance platform is deliberate; it is designed to obscure the ownership, control, and location of the Binance platform,” the lawsuit states .“Binance is so effective at obfuscating its location and the identities of its operating companies that it has even confused its own Chief Strategy Officer”.
CFTC Chair Rostin Behnam warned that “this should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law“. We will convey to you more Binance sued by CFTC news as the updates on the topic come by.
