CHICAGO—Crypto exchange Binance and its CEO have been sued by the Commodity Futures Trading Commission (CFTC).
The regulator filed the lawsuit in U.S. district court for the Northern District of Illinois. The CFTC alleges that the executive and his company broke trading and derivatives laws. Binance CEO Changpeng Zhao and Samuel Lim, Binance’s former chief compliance officer, are named in the complaint as defendants.
The news has helped fuel an outflow in deposits, as traders have pulled more than $2 billion out of the world’s biggest crypto exchange in the past week, according to The Wall Street Journal. Despite that, Binance coin, the firm’s in-house token, has climbed nearly 3% in days after the CFTC action.
What is Being Alleged
According to Blockworks, Binance has executed commodity derivatives transactions to and for people in the U.S. since July 2019. But the CFTC is alleging the company did not require its customers to provide identity-verifying information and failed to put in place compliance procedures, according to the lawsuit.
According to the complaint, “Binance, under Zhao’s direction and control and with Lim’s willful and substantial assistance, has solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, options, swaps, and leveraged retail commodity transactions involving digital assets that are commodities including bitcoin, ether, and litecoin for persons in the United States.”
Additional Allegations
The complaint alleges numerous attempts to evade U.S. regulation, some of which are documented in significant detail, Blockworks added..
CFTC Chair Rostin Behnam said in a statement that the U.S. commodities overseer is looking to continue to regulate what he called the “volatile and risky” digital asset market. The CFTC also is in charge of regulating derivative products, including financial instruments tied to commodities.
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” 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.”
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