(The Herald Post) – The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance, accusing the company of willfully evading federal law by operating an illegal digital asset derivatives exchange. The lawsuit was filed in the U.S. District Court for the Northern District of Illinois, with the regulator alleging that Binance had strategically engaged in regulatory arbitrage to gain commercial advantage.
The charges primarily stem from Binance’s alleged provision of commodity derivatives transactions to U.S. residents from 2019 until the present. The CFTC asserts that under CEO Changpeng Zhao’s direction, Binance’s compliance program has been ineffectual, emphasizing this point in a press statement.
In the statement, the CFTC explained: “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.”
Offering derivatives transactions without registering with the CFTC is illegal, and the regulator emphasized that CEO Changpeng Zhao should be held accountable for these compliance failures. The CFTC added that Zhao is liable for Binance’s violations due to his control over the company and his ongoing failure to act in good faith concerning its misconduct.
The news has had a significant impact on the cryptocurrency market, with the entire crypto economy losing 2.94% against the U.S. dollar and bitcoin (BTC) falling below $27,000 per unit. The CFTC is now seeking civil monetary penalties, permanent trading and registration bans, and disgorgement.
CFTC Chairman Rostin Behnam issued a statement, asserting that the regulator is committed to protecting American investors and will not be deterred by any location or claimed lack of location. He added: “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 concluded by issuing a warning to the digital asset community, stating that the CFTC would not tolerate the willful avoidance of U.S. law: “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.”