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Key Takeaways
- CFTC said that Binance bypassed the KYC laws for its high-volume customers that are designed to protect and prevent money laundering and terror financing
- CZ said that Binance had been busy building a robust platform for its users and already have the best-in-industry mechanism to limit American users
The Commodity Future Trading Commission filed a lawsuit against the biggest #crypto exchange in the world, accusing its founder and others of offering its services to lucrative customers in the US despite the ban.
A legal action was initiated on Monday in the U.S. District Court for the Northern District of Illinois claiming that Binance conducted a derivatives trading enterprise in the United States, providing transactions for cryptocurrencies such as #bitcoin (BTC), #ether (ETH), #Litecoin (LTC), #tether (USDT), and #Binance USD (BUSD), which were referred to as commodities in the complaint. The complaint further contended that the business, under Zhao's guidance, instructed its personnel to falsify their locations using virtual private networks.
CFTC said that Binance bypassed the KYC laws for its high-volume customers that are designed to protect and prevent money laundering and terror financing.
According to the complaint filed by the CFTC, Binance's CEO Changpeng Zhao, and its business development representative, He-yi Lim, are accused of intentionally targeting and engaging with high-value customers, including institutional clients based in the United States, in violation of the exchange's compliance protocols. These actions allegedly mirror the methods that Binance employees reportedly used to evade compliance controls in China, as reported by CNBC just days before the CFTC filing.
The report highlights how the exchange representatives assisted the ‘VIP Users’ to configure their VPN services and submit non-US documents to verify their identity. The #CFTC also said that it gave unexplicit hints to its major holders before any government enforcement action to ensure that their funds are always safe. All of this was not only practiced but also promoted by word of mouth to lure more new customers to the exchange. The filed report also suggests that CZ and other leaders of Binance were directly involved in market manipulations and monitoring the high volume transactions to direct their marketing efforts.
Will CZ be Arrested?
Binance was apt in sharing a response to the accusations of the #US regulator by releasing a note on how Binance had been working with CFTC for a long time to maintain compliance. The note shared by CZ on his Twitter said that Binance had been busy building a robust platform for its users and already have the best-in-industry mechanism to ban American users. Binance also bragged about its legal team of 750+ employees that include ex-government servants and subject matter experts to ensure that they are not doing anything that crosses the line.
The note made it clear that Binance is ready to face the charges in court and is disappointed by the lack of cooperation with the regulators in the US. However, it is not easy to put the strongest man behind the bars without any solid evidence that are verifiable in the courts.
These grave accusations of #CFTC are a direct challenge to the exchange’s compliance credibility and if convicted, would make it tough for Binance to not only gain new licenses but also to retain the current ones. The entire industry awaits the further development in the case as the court decisions can impact the entire industry.
Also, Read - CZ Defends Binance Against CFTC Complaint of Improper Trading