CFTC Sues Binance and CZ Over Alleged Regulatory Violations
- The CFTC is suing crypto exchange Binance and CEO Changpeng “CZ” Zhao for allegedly violating trading and derivatives laws in the U.S..
- The regulator claimed that the platform had instructed its U.S.-based customers on how to evade its compliance controls through the use of VPNs.
Binance CEO Changpeng Zhao. CoinDesk
The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance and its CEO Changpeng “CZ” Zhao for for alleged trade violations, Bloomberg reported on 27 March.
According to the complaint filed with the U.S. District Court for the Northern District of Illinois, Binance and its CEO violated federal laws by not registering the exchange with the CFTC. The regulator alleged that Binance provided U.S. customers with derivatives trading services by offering trades in crypto, including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Tether (USDT), and Binance USD (BUSD). The CFTC said in its complaint:
“Since the launch of its platform in 2017, Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to “block” or “restrict” customers located in the United States from accessing its platform. Binance’s initial phase of strategically targeting the United States focused on soliciting retail customers.”
The lawsuit further claims that Binance and Zhao choose to ignore the registration requirements and undermine the exchange’s “ineffective compliance program” by helping users evade restrictions on U.S.-based customers. The CFTC also alleged that the company had instructed ints important U.S. customers to set up shell companies in Jersey or the British Virgin Islands in order to avoid restrictions.
Binance has been the focus of a CFTC investigation since 2021, and in February revealed it is prepared to pay fines and penalties in order to make amends for past regulatory violations. The exchange noted that it was already working with regulators on these issues, and that the outcome of the ongoing investigations would likely be fines.
- The popular crypto exchange has decided to sell its business in Russia to CommEX, a crypto exchange business that was officially launched on Tuesday.
- Binance noted that it will fully exit the Russian market, and have no ongoing revenue split or any option to buy back shares in the business.
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- The company said it will be suspending its crypto-backed debit card service in the Middle East on 25 August, and in Latin America by 21 September.
- Although no reason was given for the decision, the company noted that “less than 1% of users” in those regions will be affected by the change.
- A spokesperson said the change was due to the “changing market and user needs”, and that Binance will now be refocusing its resources on its main products and long-term goals.
- Launched in March 2022, Binance Connect helped crypto businesses connect with the traditional finance system, and supported 50 cryptocurrencies and networks such as Visa and Mastercard.