US sues world’s largest crypto exchange and CEO for alleged regulatory violations
Zachary Halaschak
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The Commodity Futures Trading Commission is suing cryptocurrency exchange Binance and its CEO for allegedly breaking U.S. regulatory law, labeling the firm’s compliance efforts a “sham.”
The CFTC filed a lawsuit against Binance and CEO Changpeng Zhao on Monday in the U.S. District Court for the Northern District of Illinois. The regulators charged that Binance, Zhao, and other entities operate the exchange in violation of CFTC regulations and the Commodity Exchange Act.
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The complaint also accuses Binance’s former chief compliance officer, Samuel Lim, of aiding and abetting the platform’s alleged violations.
The CFTC contended that Zhao and Lim worked in tandem to lure U.S.-based trading customers — even though Binance doesn’t have permission to operate domestically. Regulators said in a Monday news release that Binance operates the exchange through numerous corporate entities and through “an intentionally opaque common enterprise.”
The CFTC added that the defendants engaged in “a calculated strategy of regulatory arbitrage to their commercial benefit.”
The lawsuit seeks monetary fines and disgorgement, which means Binance, the world’s largest cryptocurrency exchange, would be forced to repay ill-gotten gains. In addition, regulators are also seeking permanent trading and registration bans and a permanent injunction against further regulatory violations.
“Defendants’ alleged willful evasion of U.S. law is at the core of the commission’s complaint against Binance,” said Gretchen Lowe, CFTC’s Enforcement Division principal deputy director and chief counsel. “The defendants’ own emails and chats reflect that Binance’s compliance efforts have been a sham and Binance deliberately chose, over and over, to place profits over following the law.”
A Binance spokesperson told the Washington Examiner that the legal filing was “unexpected and disappointing” because the company has been working “collaboratively” with the CFTC for more than two years.
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“We have made significant investments over the past two years to ensure we do not have US users active on our platform,” the spokesperson said in a statement.
“During that period, we went from approximately 100 people in our compliance team to around 750 core and supporting compliance personnel today, including almost 80 personnel with prior law enforcement or regulatory agency experience and approximately 260 personnel with professional certificates in compliance,” the spokesperson added.