Feds Sue Binance, World’s Largest Cryptocurrency Exchange
The Commodity Futures Trading Commission (CFTC) today sued Binance Holding Ltd., alleging it violated U.S. rules on futures and derivatives trading — despite the fact that Binance has no formal presence in the U.S.
The lawsuit alleges that despite Binance formally preventing American users from using the exchange, it continued to solicit U.S. customers, as well as assisting them in evading compliance controls.
Binance’s global platform stopped servicing U.S. customers in 2019, and was only useable via VPN services which mask an online user’s country of origin. In the same year, Binance created Binance.US, a platform for American users designed to comply with U.S. regulations.
Via the Wall Street Journal:
The CFTC and other federal agencies, including the Justice Department, have been investigating Binance for several years, The Wall Street Journal has previously reported. The CFTC’s main enforcement hammer—beyond levying fines—is its ability to seek orders that would permanently expel people from participating in U.S. derivatives markets or trading in cryptocurrencies that qualify as commodities, such as bitcoin, ether and litecoin.
The lawsuit alleges that Messrs. Zhao and Lim failed to supervise their companies’ activities, “including by assisting and instructing customers located in the United States to evade the compliance controls.”
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” CFTC Chairman Rostin Behnam said. “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.”
American regulators have taken an increasingly aggressive stance against the cryptocurrency industry under the Biden Administration. Coinbase, widely seen as the most reputable and compliant cryptocurrency exchange, recently received a Wells notice from the SEC — a likely precursor to legal action.