Blogs & Articles: Binance And Its CEO CZ Sued By CFTC After Alleged Regulatory Violations 🔗 1 year ago

The CFTC lawsuit details how the firm allegedly offered unregistered commodity derivatives to American customers.

The Commodity Futures Trading Commision has sued Binance, the world’s largest cryptocurrency exchange by volume, and its CEO Changpeng Zhao, alleging that the company offered the sale of unregistered derivatives to customers in the United States.

The lawsuit alleges several transgressions against CFTC regulation, including the “offering, entering into, confirming the execution of, or otherwise dealing in, off-exchange commodity futures transactions,” “operating a facility for the trading or processing of swaps without being registered as a swap execution facility (“SEF”) or designated as a contract market,” “failing to diligently supervise Binance’s activities relating to the conduct that subjects Binance to Commission registration requirements,” and “failing to implement an effective customer information program and to otherwise comply with applicable provisions of the Bank Secrecy Act.”

These violations, amongst others, were hidden within the operations of the company, which the lawsuit alleges was “designed to obscure the ownership, control, and location of the Binance platform.”

According to the lawsuit, the court must hold Binance accountable, otherwise Binance is “likely to continue to engage in the acts and practices alleged in this complaint and similar acts and practices.”

The lawsuit featured alleged internal Signal messages which indicate that the company knew of its wrongdoings and encouraged the practices within the platform.

2023 has held great regulatory challenges for Binance; in January, U.S. Senators launched an investigation into alleged criminal activity the platform participated in. In addition, the DOJ confirmed that it was split on its decision of whether to charge Binance and its executives, with reports stating that DOJ officials had discussed possible plea deals with Binance's attorneys.

It seems, however, that it was simply a matter of time before Binance was charged by some regulatory entity. The SEC has recently stated its position that cryptocurrencies outside of bitcoin are securities, with a bulletin warning recently posted describing that “those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws.” In a rather timely fashion, SEC Chair Gary Gensler today reiterated that “investors in the crypto markets are putting their assets at risk in a highly speculative asset class.”

Previously, Gensler commented that “everything other than Bitcoin is a security,” at least quelling fears that Bitcoin may be looped into potentially coming regulation.