The world’s largest cryptocurrency exchange by trading volume, Binance, & its CEO, Changpeng Zhao, is sued by the U.S. Commodities Futures Trading Commission (CFTC) over allegations of derivative trading rule violations.
According to the CFTC, Binance permitted U.S. consumers to trade cryptocurrency derivatives without registering as a U.S. futures exchange and failed to execute necessary anti-money laundering processes.
“Defendants have disregarded applicable federal laws while fostering Binance’s U.S. customer base because it has been profitable for them to do so,” the CFTC said in its complaint.
The lawsuit claims that despite not being registered with the CFTC, Binance allowed U.S. residents to trade futures and options contracts on its platform and utilized various tactics to avoid discovery.
“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,” Gretchen Lowe, chief counsel in the CFTC’s enforcement division, said.
The company directed important customers such as trading firms to set up shell companies in places such as Jersey, the British Virgin Islands and the Netherlands to avoid restrictions, the filing said, to escape restrictions, and was fully aware of the scale of its U.S. business.
Also read: Binance Employees Preaches Chinese Netizens for KYC Breaching
Binance has publicly stated that it planned to reach a settlement with US authorities investigating its business operations, and that it had resolved compliance gaps that had occurred in its early years.
In a response statement, Zhao Chengpeng, said “Upon an initial review, 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.”
The CFTC’s complaint against Binance comes on the heels of regulatory action taken by several nations, including the U.K., Japan, and Germany, and many U.S. states, which issued cease and desist orders against Binance for operating without a license.
The lawsuit is expected to have ramifications for the broader cryptocurrency industry, perhaps forcing more regulatory scrutiny of other exchanges and prompting other countries to take similar action.
