Breaking: Binance, CZ Sued By US CTFC For Violating Future And Derivatives Trading Law

Updated: 27 March 2023

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The Commodity Futures and Trading Commission (CFTC) has filed a complaint against Binance’s co-founder and CEO, Changpeng Zhao, and its former chief compliance officer (CFO), Samuel Lim. The lawsuit filed in the U.S. District Court for the Northern District of Illinois on Monday alleged that the platform knowingly offered unregistered crypto in the U.S., which is against federal laws.

The regulator claim that the Binance CEO, Zhao and Lim, violated eight core provisions of the Commodity Exchange Act. Some violations include laws that require controls “designed to prevent and detect money laundering and terrorism financing.” The complaint further stipulated that Zhao and Lim “actively cultivated lucrative and commercially important VIP users, including institutional customers, based in the United States.”

Federal regulators sued Binance, the world's largest crypto trading platform, and its CEO for allegedly violating trading rules. https://t.co/i7EcM4ATTN

— CNN (@CNN) March 27, 2023

Notably, Binance is the world’s leading exchange platform by trading volume, with over 90 million users globally. As per the CFTC, the global exchange created a system to hide its operations. The filing noted, “Binance’s reliance on a maze of corporate entities to operate in the Binance company is intentional. It is designed to hide the ownership, control, and location of the Binance firm.” It further noted that Zhao does not answer to anyone except himself.

Further, the platform directed users in the U.S. to use a wide range of methods to evade restrictions on U.S.-based customers.

CTFC asserts that the enforcement action serves as a warning to the industry

However, the CTFC Chairman, Rostin Behnam, has stipulated that;

Today’s enforcement action demonstrates that no location, or claimed lack of location, will prevent the CTFC from protecting American investors. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market.

Behman has further noted that the step by the regulator should serve as a warning to anyone in the digital asset world. He further affirmed that CTFC would not keep up with any willful avoidance of U.S. laws. He applauded CTFC’s team for bringing up the enforcement action.

On the other hand, Lim alleged advised against outright fraud but encouraged “creative means.” Lim noted:

On the surface, we cannot be seen to have the United States customers, but in reality, we should get them through other creative means.

However, the suit claimed that the crypto exchange was acutely aware that sanctioned entities and users from sanctioned areas were trading on the platform. This was done through sharing chat logs where the chief compliance officer, Lim, noted that ”the terrorists usually send small sums that are barely adequate to buy weapons with.” He further asserted that other users were ”here for crime” as per the lawsuit.

Binance has yet to reply to any comments. However, the platform CEO took to his Twitter and noted” 4” in an apparent response to the CTFC filing.

4

— CZ 🔶 BNB (@cz_binance) March 27, 2023

It is alleged that the number 4 calls the platform’s devoted international user base to do away with negative publicity concerning the exchange as ”fake news.”