Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao are facing trial from the US Commodity Futures Trading Commission (CTFC) for allegedly breaking trading and derivatives regulations.
thThe e Commodity watchdog sued Binance and Zhao in Chicago federal court for allegedly violating its regulations on derivatives trading.
Binance profited from US customers without registering with the CFTC
The agency said that despite leveraging key US commercial relationships to generate significant revenue, Binance and CZ knowingly ignored registration and compliance requirements under US federal law.
The CFTC has full jurisdiction over derivatives transactions in the US, however, it cannot compel spot trading platforms to register with the CFTC.
The CFTC also alleges that Binance, Zhao and Lim assisted US customers in circumventing Binance’s own geographic restrictions through a virtual private network. It suggests that Binance relies on a “labyrinth of corporate entities” to hide its ownership and organizational structure.
The CFTC argues that Samuel Lim, a member of Binance’s senior management, allegedly conspired with anti-money laundering and know-your-customer staff to allow criminals to use the platform.
The agency is asking the United States District Court for the Northern District of Illinois to restrain Zhao, Lim and other Binance entities from violating trading laws in the future. They will also have to pay the customers from whom they made money by violating the Commodity Exchange Act.
Binance CEO Changpeng Zhao has dismissed the allegations as FUD.
US senators have investigated Binance for alleged lax KYC/AML procedures and for hiding the interconnections of its business units.
CFTC commissioner delivers on promise of greater enforcement
Earlier this year, CFTC Chairman Rostin Behnum promised more enforcement action for crypto companies that do not comply with its rules.
The agency is probing Binance through at least 2021 to see if it has done enough to prevent US customers from trading crypto derivatives.
In the 2022 fiscal year alone, the agency is seeking more than $2 billion in restitution and other civil monetary penalties.
However, in a hearing before the Senate Agriculture and Banking Committee on December 1, 2022. Behnam advocated for the additional need for regulation to protect consumers.
On the other hand, the chairman of the CFTC’s sister agency, the US Securities and Exchange Commission, has maintained that crypto assets make them securities covered by existing US laws to generate returns from the efforts of others. Its enforcement by regulation rather than a rules-based approach has disappointed many crypto advocates.
Recently, CFTC commissioner Summer Mersinger called on Congress to force the two agencies to jointly draft crypto regulations.
BeInCrypto has reached out to the company or individual involved in the story for an official statement regarding the recent developments, but has not yet received a response.