Binance Sued By The CFTC For ‘Partying In The U.S.A’

    Binance is officially getting sued by CFTC. The U.S. Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance and its founder Changpeng Zhao Monday. The Binance CFTC trial is based on allegations that the company knowingly offered unregistered crypto derivatives products in the U.S. against federal law. This is not the first time that Binance faces an obstacle and certainly not the last. The crypto giant has had many hurdles in its way over the years. Let’s dig in. 

    Binance CFTC Lawsuit 

    Binance is facing a lawsuit filed in the U.S. District Court for the Northern District of Illinois. The Binance CFTC lawsuit claims that Binance and its founder, CZ, actively tried to illegally increase its presence in the U.S. despite publicly saying otherwise.  

    To be more specific, the claim says that Binance operated a derivatives trading operation in the U.S. Offering trades for cryptocurrencies including bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT), and Binance USD (BUSD), which the suit referred to as commodities. Moreover, the suit also claims that the company directed its employees to change their locations through the use of VPNs (Virtual Private Networks). 

    The filing has the potential to upend the exchange’s operations. And is potentially just the first gunfire in a regulatory crackdown on the world’s largest crypto exchange. Beyond expulsion and any financial costs, the CFTC filing asked the court to impose further relief, including trading and registration bans. 

    The regulator alleged that Binance, Zhao, and Lim violated eight core requirements of the Commodity Exchange Act. Including laws that require controls “designed to prevent and detect money laundering and terrorism financing.”


    Binance CFTC’s lawsuit is based on the fact that Binance is not allowed to operate in the United States. But the CFTC is claiming that Zhao and Lim, the exchange’s chief compliance officer, “actively cultivated lucrative and commercially important VIP customers, including institutional customers, located in the United States,” the complaint said.

    This means that the company actually has set foot in the U.S. through these ‘VIP’ customers. And that is against the regulations that Binance signed. 

    Binance and Zhao took steps to purposefully obscure where the exchange’s subsidiaries were located, the regulator said. “Binance is aware of its VIPs’ identities and geographic locations because Binance monitors its sources of transaction volume and fee-based revenue as a matter of course in conducting its operations,” the CFTC complaint alleges.

    Binance’s Comeback

    The Binance CFTC situation summoned a very chill initial response from Binance’s CEO CZ, who tweeted a simple number ‘4.’ 

    This is a reference to a previous tweet that Zhao tweeted back in January. That claims if he ever tweeted the number 4 it means “Ignore FUD, fake news, attacks, etc,” 

    But this is not the only statement that CZ made. The official statement came on Tuesday March 28 via the Binance Blog. 

    Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint,” The blog said. 

    “At Binance, we look for amicable solutions to all problems. We are collaborative with regulators and government agencies all around the world. While we are not perfect, we hold ourselves to a high standard, often higher than what existing regulations require. And above all, we believe in doing the right thing by our users at all times. In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges.”  -CZ via Binance Blog. 

    The Binance CFTC Fiasco

    Lastly, it is important to note that earlier this month, U.S. senators sent a letter to Zhao calling his company  “a hotbed of illegal financial activity that has facilitated over $10 billion in payments to criminals and sanctions evaders,” and saying it’s been marked by “increasingly disturbing allegations regarding the legality of its operations.” They then demanded information regarding the company. 

    Furthermore, the Binance CFTC suit is not the only one we have seen earlier in FTX’s huge crash and now Coinbase is also facing regulatory scrutiny from the SEC, which promised significant legal action is on the way. Now that U.S. regulators seek to shut both Binance and Coinbase down for violating securities and commodities laws. We can now expect the same accusations to be leveled at their smaller competitors for conducting the same types of activity. 


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