- Kyle Chua
CFTC Files Complaint Against Binance Over Compliance Violations, Alleged Illegal Practices
Binance is in hot water with U.S. authorities over how it allegedly operated illegally in the country.
The Commodity Futures Trading Commission (CFTC) has lodged a complaint against the crypto giant, its Co-Founder and CEO Changpeng Zhao and former Chief Compliance Officer Samuel Lim for breaking a number of U.S. financial regulations, as Engadget reports. The complaint, which was filed in the U.S. District Court for the Northern District of Illinois, accuses the company of knowingly offering unregistered crypto derivative products and directing U.S. customers to use virtual private networks (VPNs) to skirt compliance controls, among others.
Zhao himself is said to be responsible for the violations, and there's reportedly evidence that could prove his involvement. Meanwhile, Lim, who left Binance in 2022, supposedly provided Zhao and his employees aid. Under Zhao's leadership, Binance would ask U.S. users to create new accounts through shell companies, along with using VPNs to hide trades from regulators – moves the CFTC claims maximised the company's profits.
Binance was also accused of not asking users for mandatory identity verification, failing to register as a futures commissions merchant and using an "intentionally opaque" corporate structure. CFTC Chief Counsel Gretchen Lowe called the company's compliance mechanisms a "sham" as the regulator asks the court to impose restitution and fines, on top of trading and registration bans.
Binance has denied the accusations and defended its practices. "This filing is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years," the company said in a statement. "Nevertheless, we intend to continue to collaborate with regulators in the U.S. and around the world."
The complaint comes amid multiple high-profile scandals that are shaking up the crypto industry. Chief of which are the fraud charges against the now-defunct exchange platform FTX and its former CEO Sam Bankman-Fried. Other crypto exchanges and lenders like Coinbase and Celsius are also facing investigations.
Binance is the largest crypto exchange in the world, with over 30 million users, which is why, if it fails to resolve the complaint and work with regulators, a lot of crypto investors would be affected and may be forced to move to smaller platforms.
The CFTC has lodged a complaint against Binance, its Co-Founder and CEO Changpeng Zhao and former Chief Compliance Officer Samuel Lim for breaking a number of U.S. financial regulations.
The complaint accuses the company of knowingly offering unregistered crypto derivative products and directing U.S. customers to use virtual private networks (VPNs) to skirt compliance controls, among others.
Binance has denied the accusations, and defended its practices, calling the complaint "unexpected and disappointing".