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Binance sued by the CFTC over 'willful evasion' of U.S. federal law

Published 03/28/2023, 12:14 AM
Updated 03/28/2023, 12:14 AM

By Sam Boughedda

Bitcoin and other cryptos tumbled Monday after the largest cryptocurrency exchange in the world, Binance, was sued by the U.S. Commodity Futures Trading Commission.

The regulator is suing Binance and its Chief Executive Officer Changpeng Zhao, commonly known as CZ, for allegedly breaking trading and derivatives rules. The lawsuit was filed by the CFTC on Monday in federal court in Chicago.

At the time of writing, Bitcoin is trading around the $26,890 mark, down 4%, while Ethereum has declined over 3%, currently at $1,711.80.

The CFTC claims Binance evaded its obligations by not correctly registering with it. The complaint also alleges Samuel Lim, Binance's former chief compliance officer, aided and abetted Binance's violations.

The regulator states that Binance and numerous other corporate vehicles were operated "through an intentionally opaque common enterprise, with Zhao at the helm as Binance's owner and chief executive officer."

Binance is said to have offered and executed commodity derivatives transactions to and for U.S. customers. The CFTC declared that the exchange's compliance program has been ineffective, and "at Zhao's direction," it instructed employees and customers to "circumvent compliance controls in order to maximize corporate profits."

The agency is seeking the repayment of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of regulations.

CFTC Chairman Rostin Behnam said that for years, "Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance."

Meanwhile, Gretchen Lowe, CFTC's Enforcement Division Principal Deputy Director and Chief Counsel, commented: "The defendants' own emails and chats reflect that Binance's compliance efforts have been a sham and Binance deliberately chose – over and over – to place profits over following the law."

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