United

<p>Centralized Exchange (CEX) Binance has gained dominance in the last few months following the collapse of<a href="https://chaindebrief.com/now-that-ftx-broke-the-trust-for-everyone-whats-next-for-us/"> FTX and other crypto institutions.</a></p>



<p>However, recent regulatory actions in the United States may pose a threat to the leading CEX and it&#8217;s CEO, Changpeng &#8220;CZ&#8221; Zhao. </p>



<p>Although Binance has already been <a href="https://chaindebrief.com/the-busd-bust-are-stablecoins-dead/">hit by regulatory action</a> from the SEC over it&#8217;s stablecoin BUSD, a recent lawsuit by the CFTC (Commodity Futures Trading Commission) may signal stronger intentions by the United States to clamp down on crypto in the country.</p>



<p><strong>Also Read: </strong><a href="https://chaindebrief.com/why-the-crypto-market-is-down-today-3-key-factors-explained/">Why The Crypto Market Is Down Today: 3 Key Factors Explained</a></p>



<h2 id="strong-cftc-alleges-insider-trading-clear-violations-of-us-regulation-strong"><strong>CFTC Alleges Insider Trading, Clear Violations of US Regulation</strong></h2>



<p><em>&#8220;We see the bad, we close 2 eyes&#8221;.</em></p>



<p>That was one of the chat logs recovered by the CFTC, which they have presented as evidence against Binance possibly facilitating illegal activities.</p>



<p></p>



<figure class="wp-block-image size-full is-resized"><img decoding="async" src="https://chaindebrief.com/wp-content/uploads/2023/03/image-121.png" alt="" class="wp-image-37183" width="750" height="300" srcset="https://chaindebrief.com/wp-content/uploads/2023/03/image-121.png 809w, https://chaindebrief.com/wp-content/uploads/2023/03/image-121-300x120.png 300w, https://chaindebrief.com/wp-content/uploads/2023/03/image-121-768x308.png 768w" sizes="(max-width: 750px) 100vw, 750px" /></figure>



<p></p>



<p>The <a href="https://www.docdroid.net/60YAbCz/cftc-binance-pdf#page=74">70-odd page report </a>also notes that VIP customers of Binance, were sometimes warned in advance of possibly law enforcement inquiries. </p>



<p><strong>&#8220;After the unfreeze &#8230; VIP team is to contact the user through all available means &#8230; do not directly tell the user to run, just tell them their account has been unfrozen and it was investigated by XXX&#8221;</strong>, read one chat log from amongst Binance personnel.</p>



<p>More concerningly for regular Binance users, the CFTC alleges that CZ and Binance controls approximately &#8220;300&#8221; house accounts, which are exempt from Binance&#8217;s insider trading polycy.</p>



<p>CZ has previously traded through two such accounts.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">people really believed that their orders were getting frontrun on FTX because of Alameda but Binance somehow wasn’t doing the same shit <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f921.png" alt="🤡" class="wp-smiley" style="height: 1em; max-height: 1em;" /><br><br>FTX launchpad tokens also pumped inorganically but yeh all the Binance ones are organic user demand <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f921.png" alt="🤡" class="wp-smiley" style="height: 1em; max-height: 1em;" /><img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f921.png" alt="🤡" class="wp-smiley" style="height: 1em; max-height: 1em;" /><img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f921.png" alt="🤡" class="wp-smiley" style="height: 1em; max-height: 1em;" /></p>&mdash; hedgedhog (@hedgedhog7) <a href="https://twitter.com/hedgedhog7/status/1640439430585413632?ref_src=twsrc%5Etfw">March 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p>Twitter Commentators have quickly drawn parallels to <a href="https://chaindebrief.com/sbf-pre-mortem-of-the-entire-ftx-saga/">Alameda Research,</a> which many believed were using insider information to trade against sister company FTX&#8217;s customers.</p>



<p>Another key point in the lawsuit was Binance&#8217;s apparent expansion into the United States through &#8220;marketing efforts including on numerous social media applications such as Twitter.&#8221;</p>



<p><strong><em>&#8216;Binance&#8217;s superficial efforts to limit trading by United States Customers and Intenal Recognition that compliance program was just &#8220;for show&#8221;&#8216;</em></strong></p>



<p></p>



<h2 id="strong-8220-i-eat-our-own-dog-food-8221-says-cz-in-response-to-cftc-strong"><strong>&#8220;I eat our own dog food&#8221; says CZ in Response to CFTC</strong></h2>



<p>Despite posting a cryptic &#8220;4&#8221; on Twitter immediately after the lawsuit,<a href="https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282"> CZ&#8217;s public statement claims </a>that Binance has been &#8220;working cooperatively with the CFTC over two years&#8221;, and that there was an &#8220;incomplete recitation of facts&#8221;.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="qst" dir="ltr">4</p>&mdash; CZ <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f536.png" alt="🔶" class="wp-smiley" style="height: 1em; max-height: 1em;" /> Binance (@cz_binance) <a href="https://twitter.com/cz_binance/status/1640372505046052866?ref_src=twsrc%5Etfw">March 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p></p>



<p>The number &#8220;4&#8221; can be pronounced &#8220;si&#8221; in mandarin, which sounds eerily similar to the mandarin word for &#8220;die&#8221;, 死.</p>



<p>Regarding the insider trading allegations, CZ claims to &#8220;eat our own dog food&#8221;.</p>



<p>For the confused majority (including myself), the term &#8220;<a href="https://www.investopedia.com/terms/e/eatyourowndogfood.asp">eat your own dog food</a>&#8221; refers to a company using its own products or services for internal operations.</p>



<p>He explains that the internal Binance accounts were used for day-to-day necessities such as personal crypto holdings, his Binance card, as well as converting crypto to FIAT for personal expenses.</p>



<p>Internal regulations also impose a 90 day holding period on employees for all purchased cryptocurrencies, as well as a ban on any futures trading.</p>



<p>CZ also notes that they &#8220;intend to continue to respect and collaborate with US and other regulators around the world&#8221;, citing their over 750 person-strong compliance arm, and co-operation with US authorities to seize more than $185M in stolen funds so far.</p>



<h2 id="closing-thoughts">Closing Thoughts</h2>



<p>It seems that rumored<a href="https://cointelegraph.com/news/operation-choke-point-2-0-may-have-contributed-to-svb-collapse-mulvaney"> Operation Chokepont 2.0</a> is continuing to widen it&#8217;s reach in crypto. </p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">1) what <a href="https://t.co/fY4E4nrrMS">pic.twitter.com/fY4E4nrrMS</a></p>&mdash; H.E. Justin Sun 孙宇晨 (@justinsuntron) <a href="https://twitter.com/justinsuntron/status/1640393955354497026?ref_src=twsrc%5Etfw">March 27, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p>This month alone, we have already seen<a href="https://www.sec.gov/news/press-release/2023-59"> Poloniex founder Justin Sun sued </a>by the Securities and Exchange Commission (SEC), and CEX Coinbase <a href="https://www.forbes.com/sites/johnnavin/2023/03/25/coinbase-from-hot-ipo-to-cold-wells-notice/?sh=25c5f026635a">being served with a Wells notice</a>. </p>



<p></p>



<p>In addition to the BUSD clampdown and the current lawsuit by the CFTC, crypto is getting riskier from a regulatory standpoint &#8211; something that could turn away potential investors, both retail and institutional.</p>



<p>However, the clampdown on centralized entities could also inspire more on-chain activity, including a shift to on-chain perpetual trading platforms like GMX and dYdX.</p>



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="en" dir="ltr">The U.S. has lost its lead in blockchain developers &amp; has gone from 40% to 29% market share of open source devs.<br><br>We analyzed 200+ million code commits &amp; 11k+ developer profiles to capture geography data.<br><br>Full analysis here: <a href="https://t.co/QPY32he5lL">https://t.co/QPY32he5lL</a><br><br>Let&#39;s break it down <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/1f447-1f3fd.png" alt="👇🏽" class="wp-smiley" style="height: 1em; max-height: 1em;" /></p>&mdash; maria <img src="https://s.w.org/images/core/emoji/14.0.0/72x72/26a1.png" alt="⚡" class="wp-smiley" style="height: 1em; max-height: 1em;" /> (@MariaShen) <a href="https://twitter.com/MariaShen/status/1639327629517160448?ref_src=twsrc%5Etfw">March 24, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<p>Regardless, continuous regulatory action could stifle incentives for US-based innovators and developers, decentralizing the concentration of builders in Web3 to other crypto hubs such as Hong Kong and Dubai.</p>



<p><strong>Also Read: </strong><a href="https://chaindebrief.com/the-cheapest-way-to-off-ramp-funds-on-exchanges-in-2023/">The Cheapest Way to Off-Ramp Funds on Exchanges in 2023</a></p>



<p><em>[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]</em></p>



<p><em>Featured Image Credit: Chain Debrief</em></p>

CFTC Sues Binance and CEO “CZ” – Here’s All You Need To Know

Table of Contents

Chain Debrief

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