The United States Commodity Futures Trading Commission (CFTC) had sued Binance, its CEO Changpeng Zhao (CZ), and chief compliance officer Samuel Lim for violating trading and derivative rules.
According to the complaint filed in the U.S. District Court for the Northern District of Illinois on March 27, 2023, the exchange provided unregistered commodities offerings, referring to bitcoin (BTC), ETH (ether), and Litecoin (LTC) to customers in the state lines starting July 2019 till date.
Binance has been on the regulator’s radar since 2021 when the CFTC opened an investigation into the exchange for alleged insider trading and possible violations of federal rules. At the time, the financial watchdog was concerned that the firm allowed U.S. customers to participate in its derivatives trading without registering the product within its jurisdiction.
Binance Operated a Facility for Futures and Options Trading
The CFTC has now slammed the company with a lawsuit alleging that Binance solicited and accepted orders, accepted property to margin, and operated a facility for trading futures, options, swaps, and leveraged retail commodity transactions involving the digital assets mentioned above.
The regulator claimed the exchange violated various commodities rules, including the Commodity Exchange Act (CEA).
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” said Rostin Behnam, the CFTC chairman.
Binance CEO Owned Various Companies Controlling Binance
According to an official press release, the market watchdog charged Lim for “willfully” helping the company abet rules instead of ensuring the exchange complied with regulatory requirements.
Furthermore, the CFTC charged the Binance COO for conducting activities to evade applicable CEA rules provisions.
On the other hand, CZ was accused of instructing Binance employees and customers to avoid compliance controls to maximize corporate profits. The derivatives regulator alleged that the Binance CEO was responsible for most decisions by the company, including brainstorming a plan that allowed specific customers in the U.S. to evade the company’s compliance controls.
In addition to ordering employees to boycott laws, the CFTC alleged that CZ owned and controlled multiple companies affiliated with Binance. The CEO used these separate entities to Binance’s advantage, trading against customers.
Meanwhile, the CFTC is not the only regulatory agency after the exchange. Both the Internal Revenue Service (IRS) and the Department of Justice (DOJ) launched a probe into the company to examine its anti-money laundering regulations.
The Securities and Exchange Commission (SEC) has been looking into the firm since last year to determine whether it breached its securities rules.
