The turbulence on crypto exchanges does not subside. US Moves to Crack Down on Activities of Largest Crypto Exchange, Binance and Its Chief Executive Officer Changpeng Zhao, Also known as CZ.
The US Commodity Futures Trading Commission (CFTC) has decided to sue the largest cryptocurrency exchange Binance and founder Zhao with allegations that the company knowingly offered cryptocurrency derivative products not registered in the United States against federal law.
The CFTC, in the lawsuit filed in the Chicago District Court, pointed out that Binance operated derivatives trading operations in the United States, offering cryptocurrency exchanges including bitcoin, ether, litecoin, tether and Binance (BUSD), indicating them as commodities .
One of the more surprising allegations is that the CEO of Binance allegedly traded on his platform through 300 account all owned directly or indirectly by CZ. In a statement released two days ago, Gretchen Lowea CFTC official, called Binance’s efforts to comply with the rules “one farce”.
Bitcoin travels down slightly by 0.7% to $26,900.
The allegations of the US authorities
US authorities said the company, under Zhao’s leadership, ordered its customers to spoof their locations through the use of virtual private networks.
Furthermore, they accuse Binance of violating the laws on the offer of futures transactions, “and illegal off-exchange commodity options”, failure to register with the relevant US agencies. According to the agency, Binance has failed to implement an effective anti-money laundering program. Furthermore, it has not established the necessary safeguards to determine the true identity of customers. The complaint states that as of at least May 2022, the company had not filed a single suspicious activity report in the United States.
In addition to suing Zhao and several Binance entities, the CFTC also said that the company’s former Chief Compliance Officer, Samuel Limwould break the rules.
The agency accuses Zhao, Lim and other senior managers of failing to properly oversee Binance’s activities and that it has taken steps to violate US laws, including instructing US customers to use virtual private networks or VPNs to obscure their location and instructing its employees to direct “VIP customers”, often institutional and with links to the US, to open accounts on the platform under the name of companies of foreign companies.
Internal email and chat
The Chicago District Court filing also points to internal chats between Binance employees, including Samuel Limthe exchange’s chief compliance officer until January 2022 (who is also a defendant), in which Lim appeared to direct an employee to ask US customers to hide their location.
“On the surface it may not be seen that we have US users, but in reality we should be getting them through other creative means,” Lim reportedly wrote.
“The defendants’ emails and chats reflect that Binance’s efforts to cooperate with US authorities have been a farce and Binance has deliberately chosen – over and over again – to invest in profits and not in following the law,” he said. stated Gretchen Lowe of the CFTC.
Binance’s response
In a statement, Binance called the CFTC lawsuit “unexpected and disappointing.” The exchange said it has been working with the regulator for more than two years and will continue to work with regulators in the United States and elsewhere.
“We have made significant investments over the past two years to ensure we have no active US users on our platform,” Binance said. The firm added that it has expanded its compliance team, spent heavily on tightening surveillance, and taken significant action to prevent Americans from using its global trading platform.
In a statement on the Binance blog, Zhao said that the CFTC complaint “appears to contain an incomplete account of the facts, and we disagree with the characterization of many of the issues mentioned in the complaint.”
The CFTC is a civilian government agency, so it can’t bring criminal charges against companies or seek jail time for people. However, the regulator’s cases can result in hefty fines and other penalties against businesses and individuals.