Binance Sued by CFTC for Alleged Violations of Trading and Derivatives Rules – The CFTC has charged Binance with willful evasion of federal law, claiming the exchange illegally traded digital asset derivatives. The case was brought in the U.S. District Court for the Northern District of Illinois by the CFTC.
The agency asserts that Binance employed a deliberate regulatory arbitrage technique to its commercial advantage. The central allegation is that, from 2019 to the present, Binance offered commodity derivatives trades to U.S. residents. The regulator emphasized in a news release that Binance’s compliance program has been unsuccessful under the leadership of CEO Changpeng Zhao.
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“The complaint charges that for much of the relevant period, Binance did not require its customers to provide any identity-verifying information before trading on the platform, despite the legal duty that entities like Binance functioning as futures commission merchants (FCMs) collect such information, and failed to implement basic compliance procedures designed to prevent and detect terrorist financing and money laundering,” the CFTC explained on Monday.
Facilitating derivatives transactions without registering with the regulator is illegal, according to the CFTC. The governing body emphasized that CEO Changpeng Zhao is accountable for such compliance lapses.
The CFTC stated: “Zhao is liable for Binance’s violations based on his control over Binance and his long-running failure to act in good faith concerning Binance’s misconduct. Following the news, the entire crypto economy lost 2.94% against the U.S. dollar with bitcoin (BTC) sinking below the $27,000 per unit range. “
The CFTC seeks monetary civil penalties, permanent trading and registration bans, and disgorgement. “Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors,” CFTC Chairman Rostin Behnam said in a statement.
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“I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market,” Behnam added. “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law,” the chairman concluded.
