Binance, one of the world’s largest cryptocurrency exchanges, has been facing regulatory concerns from authorities around the world. The exchange has been accused of violating a number of regulatory requirements, including anti-money laundering (AML) and know-your-customer (KYC) rules. Recently, Binance has been sued by the US CFTC for alleged derivatives trading violations.
Binance Faces Legal Action By CFTC
The regulatory concerns regarding Binance’s crypto business are bringing FUD situations for investors as the crypto exchange is facing increased regulatory scrutiny from authorities. According to court documents filed on Monday, the Commodity Futures and Trading Commission (CFTC) has filed a complaint against Binance, one of the world’s largest cryptocurrency exchanges, and its co-founder, Changpeng Zhao. The complaint alleges that Binance has actively solicited users from the United States and undermined the exchange’s own compliance program, which the CFTC claims to be ineffective.
The complaint claimed that Zhao and Samuel Lim, the ex-chief compliance officer, deliberately sought to attract profitable and valuable “VIP” clients, including institutional customers based in the United States.
According to the filing, Zhao’s company is facing a lawsuit for reportedly violating regulations on trading and derivatives. Additionally, the exchange has failed to register with the CFTC and has disregarded U.S. financial market laws that are designed to prevent and detect illicit activities such as money laundering and terrorism financing.
Binance Failed to Supervise Its Activities
The agency pointed out that Binance’s revenue from derivatives transactions had surged from $63 million in August 2020 to $1.14 billion by May 2021. However, approximately 16% of Binance’s accounts were held by customers based in the United States. According to a lawsuit by the CFTC, Binance engaged in trading on their own platform through 300 accounts that were either directly or indirectly linked to their CEO CZ.
The filing further alleged that Zhao and other senior management members at Binance had neglected their responsibility to oversee the exchange’s operations and had even played an active role in facilitating violations of U.S. laws. This included assisting and instructing U.S.-based customers to evade compliance controls that were intended to detect and prevent such violations.
The CFTC previously launched an investigation into Binance over concerns that it enabled U.S. citizens to place wagers that contravened U.S. regulations. Binance has not yet publicly responded to the CFTC’s complaint. However, the exchange has previously stated that it takes compliance very seriously and has made efforts to improve its compliance procedures in recent months. Despite this, Binance’s regulatory issues continue to mount, which could have serious consequences for the exchange’s future operations.
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