The Commodities Futures Trading Commission (CFTC) in the United States is suing Binance, the largest cryptocurrency exchange in the world, as well as its CEO and founder Changpeng Zhao for running what the agency claims were an “illegal” exchange and a “sham” compliance program.
According to the officials, Mr. Zhao and Mr. Lim used an “opaque network of company organizations” to funnel business back to a hub that Mr. Zhao oversaw. The C.F.T.C. claims that they even assisted US cryptocurrency traders in establishing sham firms to conceal their true locations.
Binance actively worked to both keep the money flowing and evade compliance for years, according to the head of the C.F.T.C., Rostin Behnam, who released a statement announcing the lawsuit’s filing. “Everyone in the field of digital assets should take this as a reminder that the C.F.T.C. will not tolerate intentional disregard for U.S. law.”
The CFTC accuses the business of failing to implement procedures for confirming customers’ identities and preventing money laundering and terrorism funding. Binance is also accused of operating as a designated contract market without filing the necessary paperwork with the CFTC, as required by law, according to the lawsuit. The exchange where futures or options are traded is known as a specified contract market.
When it comes to signing up for the foreign version of its exchange, Binance announced that it will no longer accept U.S. users. Nonetheless, the CFTC asserts that it went on to serve US clients. The company asserts that by aggressively assisting US “VIP clients,” they were able to use the platform’s foreign version.
The platform of Binance features security measures to prevent unwanted entry attempts. The CFTC claims that the business advised VIP clients in the US to get around its restrictions by using virtual private network software. Moreover, it was claimed that staff members used a messaging app that was set up to erase client contact automatically to send instructions on how to do so.
The CFTC alleges that Zhao, who it claims is in control of “all important strategic decisions at Binance,” came up with the plan. Lim, who served as the business’s top compliance officer from 2018 to 2022, is charged with encouraging the corporation to break financial laws. According to the lawsuit, Lim directed staff to go around compliance measures using “creative ways.”
The event occurs just after Coinbase Global Inc., another significant bitcoin exchange provider, received a similar notice from the U.S. Securities and Exchange Commission. When it discovers possible breaches of securities laws, the SEC notifies the company in question. The Coinbase Earn, Coinbase Prime, and Coinbase Wallet services, according to Coinbase, are affected by the enforcement action.