According to recent news, the Commodities Futures and Trading Commission has initiated legal action against Binance, its CEO and cofounder Changpeng Zhao, and Samuel Lim, the former Chief Compliance Officer, for purportedly breaking trading regulations.
On Monday, in the regulator’s complaint lawsuit in the federal court, the defendants reportedly violated eight entities of the Commodity Trading Act. The complaint stated that Changpeng Zhao and Samuel Lim allegedly disregarded the obligation to register under US registration law, as they solicited United States customers, particularly high-value and commercially significant “VIP” clients.
Moreover, the complaint also alleged that Binance assisted its clients in circumventing its permission controls and bypassing its “inefficient compliance system. We are surprised and disappointed by this filing since we have been actively cooperating with the CFTC for over a couple of years,” commented a spokesperson from Binance, further stating that the company will continue to collaborate with regulators to create a transparent and well-planned regulatory framework.
Additionally, Binance highlighted that it has considerably increased its compliance personnel and has invested eighty million dollars in transaction governance, “know your customer” regulations, and other regulatory initiatives, as well as implemented measures to block United States inhabitants from its platform.
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The CFTC’s filing seeks financial penalties against the exchange, registration, and trading prohibitions. According to the complaint, Binance allegedly ignored crucial federal laws that ensure the credibility and stability of the United States financial markets, such as the laws requiring the implementation of regulations aimed at identifying and preventing terrorism financing and money laundering, by failing to register with the CFTC.
The CFTC’s complaint further claimed that Binance took measures to conceal its clients and their whereabouts, including concealing the whereabouts of its executive offices undisclosed. Additionally, the exchange allegedly instructed United States users to utilize virtual private networks to conceal their whereabouts and did not demand proof of identity for customers to conduct trades.
It is worth noting that Binance was already scrutinized by the United States Department of Justice regarding its adherence to anti-money laundering policies. In addition, the Securities and Exchange Commission has charged Binance.US with running an unauthorized securities platform.
Binance Expresses Disappointment Over CFTC Lawsuit
Following the recent federal regulatory lawsuit against Binance that has caused upheaval within the cryptocurrency community, the cryptocurrency exchange stated that the most effective way forward is to ensure the protection of its customers while simultaneously collaborating with regulators to establish a transparent regulatory ecosystem.
We are surprised and disappointed by the CFTC’s complaint as we have been actively cooperating with them for over a couple of years,” commented a spokesperson from Binance in an email to Decrypt. “Despite this, we remain committed to working with authorities in the United States and worldwide.
Over the past couple of years, we have made substantial investments to prevent United States customers from utilizing our forum,” stated the company. “We have expanded our compliance team from around one hundred individuals to more than seven hundred fifty supporting and core compliance staff today.
Binance also indicated that it had established a comprehensive “three lines of security” system for compliance and risk. It required mandatory know-your-customer procedures, prohibiting customers with United States IP addresses and mobile providers, and blocking withdrawals and deposits from United States banks.