Binance, one of the largest cryptocurrency exchanges in the world, and its CEO, Changpeng Zhao, are being sued by the Commodities Futures Trading Commission (CFTC) for alleged violations of regulatory requirements. The lawsuit, which was filed in federal court in Chicago on Monday, accuses Binance and Zhao of breaking trading and derivatives rules.
The CFTC further claims that CZ has been using a slew of bogus Binance accounts to conduct unregistered proprietary trading.
“In addition to the entities that operate the Binance platform, Zhao is the direct or indirect owner of entities that have engaged in proprietary trading activity on the Binance platform, including Merit Peak Limited and Sigma Chain AG, and Zhao is also the direct or indirect owner of approximately 300 separate Binance accounts that have engaged in proprietary trading activity on the Binance trading platform. Zhao has never been registered with the Commission in any capacity.”
Allegations of Evasion and Non-Compliance
According to the lawsuit, Binance has solicited and accepted orders from U.S. customers involving spot and derivative transactions offering trades for cryptocurrencies, including bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT), and Binance USD (BUSD), which the suit referred to as commodities.
Despite not being registered with the CFTC, these products have been active since July 2019. Furthermore, the crypto behemoth has purposefully concealed the location of its executive offices, with Zhao claiming that Binance’s headquarters are wherever he is at any given time.
The suit further claims that Binance and its officials deliberately assisted breaches of US law by encouraging US consumers to use VPNs to circumvent compliance procedures and enabling clients who had not provided proof of identification and location to trade on the platform to continue trading. Moreover, Binance is accused of urging VIP clients with assets in the United States to create Binance accounts using shell businesses in order to avoid compliance restrictions.
CFTC Seeking Penalties and Remedies
The CFTC is seeking monetary penalties and additional remedies, including a trading and registration ban, the return of ill-gotten gains, and prejudgment and postjudgment interest, to put an end to Binance’s illegal activities and get them to comply with the law.
The news of the lawsuit shook the cryptocurrency market, sending the price of Bitcoin down to $26,766, a 4.4% drop for the day. Binance Coin (BNB), the exchange’s native cryptocurrency, has also suffered a 1.6% reduction in value.
