CFTC sues Binance and CZ for violating U.S. law

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suing binance

The US Commodity Futures Trading Commission (CFTC) announced on the 27th that it has filed a lawsuit against major cryptocurrency exchange Binance and its CEO Changpong Zhao (CZ).

It is a problem that Binance itself, not the US division Binance US, intentionally did not register with the CFTC and provided derivatives trading services in the United States. The CFTC calls for restitution of unjustified gains, payment of fines, and a permanent ban on business registration.

The CFTC claims that Binance has offered U.S. users the ability to trade “commodities, including Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC)” from July 2019 to date. It points out that compliance rules were not applied under Mr. CZ’s instructions in order to maximize the company’s profits.

Specifically, it explained that it provided trading services during the above period without requiring users to submit personal information. Despite operating like a U.S. “futures brokerage”, it failed to follow basic anti-terrorist financing (CFT) and anti-money laundering (AML) procedures.

connection: U.S. Congressman sends a letter to Binance, requesting information on regulatory compliance, etc. by 16th

Other issues

He also said Binance had instructed U.S. users on how to circumvent compliance measures, even though it claimed to restrict access from the U.S. It also alleges that messages between Binance employees and U.S. users used a messaging tool that automatically deleted sentences.

Strictly speaking, the lawsuit was filed against the following three companies that operate the Binance platform and Mr. CZ. The company also sued Samuel Lim, the company’s former chief compliance officer, for aiding the breach.

Binance Holdings Limited
Binance Holdings (IE) Limited
Binance (Services) Holdings Limited

CFTC Chairman Rostin Behnham said:

Binance has been aware for years of violating CFTC rules. Despite this, it has maintained the flow of funds and avoided compliance issues.

The lawsuit should serve as a warning to everyone in the digital asset space that the CFTC will not tolerate willful non-compliance with U.S. law.

Comment from Mr. CZ

Binance released CZ’s comments this morning following the CFTC lawsuit.

CZ’s Response to the CFTC Complainthttps://t.co/iIoDR70IT9

—Binance (@binance) March 27, 2023

First, Mr. CZ said he regretted the unexpected litigation after working with the CFTC for more than two years.

He also pointed out that the complaint contains inaccurate content. For example, Binance has implemented state-of-the-art compliance technology, claiming it uses multiple measures, including identity verification, to block U.S. users.

Binance has said it hopes for a peaceful resolution to the lawsuit.

connection: Binance ready to accept settlement with US regulators, including payment of fines

What is Binance

Operates a major virtual currency exchange with a large number of traded stocks, trading volume, and registered users. In addition, we are developing a wide range of businesses such as the activities of the venture capital department, the provision of educational content, and philanthropic activities. In November 2010, the company announced its entry into the Japanese market.

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