Authorities in the United States continue their crackdown on the crypto industry. This time, targeting the crypto exchange Binance and its CEO.
A recent Bloomberg report has revealed that the United States Commodity Futures Trading Commission (CFTC) has allegedly filed a lawsuit against leading cryptocurrency exchange Binance and its CEO, Changpeng "CZ" Zhao.
The lawsuit filed in the US District Court for the Northern District of Illinois alleges that Binance made several trading violations.
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According to a CFTC lawsuit, Binance has been facilitating transactions in Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) for US residents since at least 2019, despite being prohibited to do so.
On top of that, the lawsuit alleges that Binance and its executives, including CZ and the former Chief Compliance Officer (CCO), knowingly breached US regulations. The lawsuit stated:
All the while, Binance, Zhao, and Lim, the platform’s former Chief Compliance Officer (“CCO”), have each known that Binance’s solicitation of customers located in the United States subjected Binance to registration and regulatory requirements under US law.
Furthermore, the lawsuit claims that Binance intentionally hid the locations of its executive offices and the "identities and locations of the entities operating the trading platform."
An internal Binance memo cited in the lawsuit reveals CZ's intention to "keep countries clean <of violations of law>" by "not landing .com anywhere. This is the main reason .com does not land anywhere."
The lawsuit filed by the CFTC contains additional allegations against Binance, including failure to register with the regulator and violating the Commodities Exchange Act and CFTC regulations. These violations include the non-implementation of legally mandated Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
It appears that CFTC has been investigating Binance's operations since 2021, claiming that the exchange did not register properly with the derivatives regulator, thereby neglecting its regulatory responsibilities.
Apart from the CFTC, other US agencies, such as the Internal Revenue Service and federal prosecutors, have been looking into Binance's adherence to Anti-Money Laundering (AML) regulations. On top of that, the Securities and Exchange Commission (SEC) has been examining if the crypto exchange permitted US-based traders to access unregistered securities.
However, the lawsuit from CFTC is not the only problem Binance is dealing with. On March 23rd, CNBC reported that Binance employees and specialized "volunteers" were allegedly helping users in China and other countries to circumvent Binance's Know Your Customer (KYC) protocols.
