The Commodities Futures Trading Commission sued the Binance exchange and its CEO Changpeng “CZ” Zhao on Monday in a federal court in Chicago for allegedly breaking federal regulations and failing to register the exchange there.
The allegations claim that, despite openly declaring its intention to ‘ban’ or restrict clients in the United States from using its platform, Binance has adopted a calculated, planned strategy to grow its presence in the country since 2017.
As the website has not registered to conduct business in the United States and only the Binance US subsidiary is permitted to do so, the agency considered this as illegal conduct.
The complaint further claims that Binance, Zhao, and former Chief Compliance Officer Samuel Lim all decided to violate these requirements and undermine Binance’s ineffective compliance program by taking actions to assist users in getting around the platform’s access restrictions.
The CFTC also stated, using Binance data got by the agency, that the exchange made $63 million in fees from futures trades, and that around 16% of its accounts were owned by users Binance recognized as being in the United States.
“By May 2021, Binance’s monthly revenue earned from derivatives transactions increased to $1.14 billion. Binance’s decision to prioritize commercial success over compliance with U.S. law has been, as Lim paraphrased Zhao’s position on the matter, a ‘biz decision.'”
CZ responds to the CFTC complaints
The co-founder and chief executive of the Binance exchange has revealed his disappointment over the recent CFTC’s filing, saying it came despite their working “cooperatively” with the American regulator for over two years.
“Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint,” Chanpeng Zhao maintained.
He said that the international cryptocurrency exchange Binance.com, which he described as having one of the highest standards for KYC and AML, had created best-in-class technology to assure compliance and was the first international (non-US) exchange to adopt a required KYC program.
CZ also refuted the claims that his business ensures that US consumers are blocked based on nationality (KYC), IP address, mobile carrier, bank deposit and withdrawal, and other factors. CZ said,
“We are aware of no other company using systems more comprehensive or more effective than Binance.”
Similarly, he stated employees are not permitted to trade in Futures or sell a coin within 90 days of their most recent purchase, or vice versa, in order to prevent them from actively trading.
Although they are not perfect, CZ concluded they work together with government organizations and regulators all over the world and that they keep themselves to a high level that is usually greater than what is required by existing regulations.
Depositors flee from Binance, withdrew over $400m in crypto
Binance users withdrew huge sums of crypto totaling over $400 million on Ethereum from the exchange following the CFTC complaints news, according to blockchain research firm Nansen.
Nonetheless, the Nansen blockchain data analytics group claimed that Binance still maintains $63.2+ billion in its publicly disclosed wallet, despite the decline of almost $500 million from the cryptocurrency exchange’s reserves.
Binance holds $63.2+ billion in their publicly disclosed wallets, including:
$19B in $USDT
$14.5B in $BTC
$7.5B in $ETH
$7.1B in $BUSD
$3.2B in $BNB
And othersYou can track their holdings and transactions here: https://t.co/AkZDPyxbiN pic.twitter.com/PWrTYzeKsM
— Nansen Portfolio (@nansenportfolio) March 28, 2023
