Binance and its founder Changpeng Zhao are being sued by the Commodity Futures Trading Commission for numerous alleged violations of the Commodity Exchange Act, CEA, and CFTC regulations.
Binance’s former chief compliance officer, Samuel Lim, was also charged with aiding and abetting Binance’s violations.
In its complaint, the CFTC claimed that cryptocurrency exchange giant Binance “allegedly chose to knowingly disregard applicable provisions of the CEA while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit”.
For example, Binance did not require customers to provide any identity-verifying information. It also communicated with American customers using a messaging platform that automatically deleted written communications.
The CFTC filed the complaint Monday in the US District Court for the Northern District of Illinois. It is seeking disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations.
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” CFTC Chairman Rostin Behnam said in a statement. “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate wilful avoidance of US law.”
“This filing is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years. Nevertheless, we intend to continue to collaborate with regulators in the US and around the world,” Binance said in a statement.
In November Binance proposed the creation of a rescue fund that would save otherwise healthy crypto companies from failure, aiming to stave off the cascading effects of the implosion of FTX, the world’s third-largest crypto exchange. Zhao provided no details on the fund’s size or scope, or how the funds would be distributed. That same month, Binance had pulled out of a deal to buy FTX Trading.
A month earlier, Binance was dealing with a hack of its Binance Smart Chain blockchain network, in which it may have lost more than US$100 million.