Recently, the Commodity Futures Trading Commission (CFTC) filed a complaint against Binance’s CEO Changpeng Zhao and former CCO Samuel Lim for allegedly violating US trading and derivatives law. Binance operates the world’s largest centralized digital asset exchange. The complaint alleges that Zhao and Lim knowingly solicited retail customers in the United States which would therefore subject Binance to registration and regulatory requirements under U.S. law. However, the CFTC claims that Zhao and Lim have “chosen to ignore those requirements and undermined Binance’s ineffective compliance program by taking steps to help customers evade Binance’s access control.”
The complaint further alleges that Binance has purposefully obscured the identities and locations of the entities operating the trading platform. The complaint states that Zhao has claimed that Binance’s headquarters is wherever he is located at any point in time, which the CFTC alleges is a “deliberate approach to attempt to avoid regulation.”
Binance has never been registered with the CFTC. The complaint alleges that Binance has therefore “disregarded federal laws essential to the integrity and vitality of the U.S. financial markets, including laws that require the implementation of controls designed to prevent and detect money laundering and terrorist financing, in violation of the Commodity Exchange Act and the CFTC Regulations.”
Zhao quickly responded to the lawsuit saying, “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.” This lawsuit should not come as a big surprise as there is clearly a trend towards cracking down on the cryptocurrency industry after the collapse of FTX.
