NEW YORK — The U.S. Commodity Futures Trading Commission (CFTC) has taken legal action against Binance, the leading global cryptocurrency exchange, and its CEO and founder, Changpeng Zhao.
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The CFTC has alleged that Binance operated unlawfully and lacked a comprehensive compliance program.
The commission has accused Binance, Zhao, and a former compliance executive of deliberately sidestepping U.S. regulations, while engaging in regulatory arbitrage to reap commercial gains.
These serious allegations highlight the need for robust and transparent compliance measures within the cryptocurrency industry, and the imperative for regulatory bodies to enforce stringent standards to protect investors and ensure fair market practices.
Against the backdrop of a growing crackdown on cryptocurrency enterprises, the regulatory lawsuit has been filed. For years, both civil investigators and U.S. prosecutors have pursued crypto firms for non-compliance with regulations designed to curtail illicit activity and for unauthorized offerings. However, in recent times, there has been a marked escalation in the frequency of such governmental interventions.
The CFTC said in its complaint on Monday that from at least July 2019 to the present, Binance “offered and executed commodity derivatives transactions on behalf of U.S. persons,” in violation of U.S. laws.
Binance, which dominates the global digital asset market, has pledged to collaborate with regulators despite the lawsuit being “unexpected and disappointing”.
The CFTC has oversight of commodities and derivatives markets, including Bitcoin, and requires firms such as brokers that facilitate trading for U.S. customers to register with the agency.
The U.S. Justice Department has reportedly been investigating Binance since 2018 for possible money-laundering and sanctions violations.
Reuters has found that Binance has processed at least $10 billion in payments for criminals and companies attempting to evade U.S. sanctions.
In response to the CFTC’s allegations, Binance’s cryptocurrency BNB, the world’s fourth-largest by market size, dropped approximately 4%.
Although Zhao has not directly addressed the accusations, he tweeted a reference to his “Do’s and Don’ts” for 2023, which included ignoring “FUD” or negative news.
The CFTC’s allegations underscore the need for the cryptocurrency industry to comply with stringent standards and regulatory bodies to ensure fair market practices and protect investors.