US Regulator Files Lawsuit Against Binance and CEO for Operating "Illegal" Exchange and "Sham" Compliance Program

Binance, the world’s largest cryptocurrency exchange, and its CEO and founder Changpeng Zhao have been sued by the U.S. Commodity Futures Trading Commission (CFTC) for operating an “illegal” exchange and “sham” compliance programme. The regulator has accused Binance of “willful evasion” of U.S. law and engaging in a “calculated strategy of regulatory arbitrage” to benefit itself. Binance’s former Chief Compliance Officer Samuel Lim has been accused of “aiding and abetting” Binance’s violations. The lawsuit is part of a wider crackdown on crypto companies by US prosecutors and civil investigators.

According to the CFTC, Binance “offered and executed commodity derivatives transactions on behalf of US persons” in violation of US laws. The regulator also accused Binance’s former Chief Compliance Officer Samuel Lim of “aiding and abetting” Binance’s violations. The company’s compliance programme has been deemed “ineffective” and the firm, under the direction of Zhao, is said to have told employees and customers to circumvent compliance controls.

The CFTC is responsible for overseeing commodities and derivatives markets, including for Bitcoin. Reuters reported in December 2021 that the US Justice Department had been investigating Binance since 2018 for possible money-laundering and sanctions violations. Binance has processed at least $10 billion in payments for criminals and companies seeking to evade US sanctions.

Binance’s cryptocurrency BNB, the world’s fourth largest by market size, dropped around 4% on the news. In a tweet on Monday afternoon, Zhao wrote “4” – a reference to a previous post listing his “Do’s and Don’ts” for 2023. The fourth item on the list was “Ignore FUD, fake news, attacks,” using an acronym for “fear, uncertainty and doubt” often used in crypto in relation to news perceived as negative.

Founded in Shanghai in 2017, Binance sits at the heart of the global crypto industry. Its core Binance.com exchange processed trades worth about $23 trillion last year, according to data provider CryptoCompare. With a holding company based in the Cayman Islands, Binance has never revealed the location of its core exchange. The CFTC charged the holding company and two other Binance units.

Mohmed Abdelaziz

A journalist and reviewer with extensive experience in programming and social media, he has a strong CV in the field of technology. You can contact him via e-mail: [email protected]

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