The U.S. Commodity Futures Trading Commission (CFTC) sued Binance and its CEO Changpeng Zhao for trading violations. CZ denied the allegations, calling them “an incomplete recitation of facts.”
The CFTC filed the lawsuit in U.S. District Court for the Northern District of Illinois against Binance, its CEO Changpeng Zhao, and Samuel Lim, Binance’s former CCO. Bloomberg published the full 74-page indictment document.
Among the main charges are the exchange’s failure to comply with regulatory obligations, failure to properly register with the regulator, and a policy toward U.S. customers aimed at circumventing AML and KYC regulatory restrictions and procedures.
The CFTC’s allegations against Binance include:
- Processing cryptocurrency transactions for U.S. citizens beginning in at least 2019 and helping circumvent its blocking or service restrictions for U.S. customers.
- Hiding the location of its executive offices and “the identities and locations of the entities operating the trading platform.”
- Insider trading on the platform through over 300 “house accounts” affiliated directly with CZ and its associates, etc.
Changpeng Zhao responded to the CFTC’s accusations by claiming that Binance “does not trade for profit or “manipulate” the market under any circumstances.” He denied the allegations, calling them an “incomplete recitation of facts,” and the lawsuit from the regulator was “unexpected and disappointing,” as the cryptocurrency exchange had been working with the CFTC for more than two years.
CZ said the crypto exchange’s AML and KYC compliance technology is “best-in-class,” backed by a team of over 750 professionals. Binance CEO also noted that the crypto exchange had 16 digital asset trading licenses, outnumbering any other cryptocurrency trading platform.
The crypto community also had questions about the lawsuit. For example, how were prosecutors able to access the Signal messages, which have a higher level of privacy, and the group chats “from Zhao’s telephone.” Those are cited as evidence in the indictment document. Or why did the CFTC officials label BTC, ETH, and LTC cryptocurrencies as commodities and USDT and BUSD stablecoins? Given the fact that another regulator just recently identified BUSD as a security and halted its issuance in the U.S. on that basis.
There’s an opinion that the current lawsuit against Binance is part of a deliberate campaign to discredit the U.S. cryptocurrencies in order to further introduce the central bank digital currency.
Recall that the CFTC’s investigation of Binance has been ongoing since 2021. Moreover, the Securities and Exchange Commission (SEC), the Internal Revenue Service, and the U.S. Attorney’s Office have been investigating the crypto exchange. Representatives of Binance were aware of the claims from the authorities, and in February, they announced plans to “close all ongoing investigations initiated in the U.S.”
