{"id":381927,"date":"2023-03-28T10:52:40","date_gmt":"2023-03-28T10:52:40","guid":{"rendered":"https:\/\/insidebitcoins.com\/?p=381927"},"modified":"2023-03-28T10:52:40","modified_gmt":"2023-03-28T10:52:40","slug":"binance-ceo-addresses-four-key-issues-in-his-response-to-cftcs-disappointing-complaint","status":"publish","type":"post","link":"https:\/\/insidebitcoins.com\/news\/binance-ceo-addresses-four-key-issues-in-his-response-to-cftcs-disappointing-complaint","title":{"rendered":"Binance CEO Addresses Four Key Issues In His Response To CFTC’s \u201cDisappointing\u201d Complaint"},"content":{"rendered":"

Binance, the largest cryptocurrency exchange by trading volume, is in trouble. The US Commodity Futures Trading Commission (CFTC) just slammed it with a “<\/span>civil enforcement action.<\/span><\/a>”<\/span><\/p>\n

This cannot be good news for the Changpeng Zhao-led company as the CFTC alleges that Binance and its Chief Executive Officer (CEO), violated federal laws. The charges were placed on three persons, Binance (Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited<\/strong><\/em>), Changpeng Zhao a.k.a CZ, the CEO of Binance, and Samuel Lim, the former Chief Compliance Officer (CCO) of Binance between 2019-2022. <\/span><\/p>\n

This is not a mild charge by the CFTC as the over 1000-word civil enforcement action complaint against the exchange stated “For years Binance knew they were violating CFTC rules.” and its efforts to comply with futures and derivatives trading laws “have been a sham.” The regulator also accused Zhao of his “long-running failure to act in good faith” while at the helm of the company. <\/span><\/p>\n

Regulators Go After Binance’s Crypto Derivatives Business<\/span><\/h2>\n

The filing revealed that CFTC was not after Binance’s spot trading services. It was after its cryptocurrency derivatives business. <\/span><\/p>\n

Note that <\/span>crypto derivatives, in the US, are <\/span>treated<\/span><\/a> as commodities and hence are under the CFTC’s jurisdiction, while spot cryptos are treated as securities when sol<\/span>d. <\/span><\/p>\n

Therefore, th<\/span>e regulator is going after Binance for five main reasons: <\/span><\/p>\n

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    • Issues with registration<\/b>: According to CFTC, Binance is not registered in the US, however, it has continued to offer derivatives services to people in the US between 2019 – 2022.<\/span><\/li>\n
    • Lack of proper KYC procedures: <\/b>Binance did not follow the proper procedures to verify the identity of the people using its platform. According to the government agency, the exchange did not follow KYC, terrorist financing, or anti-money laundering (AML) guidelines.<\/span><\/li>\n
    • Trading against customers:<\/b> The crypto firm has two in-house trading companies: Merit Peak and Sigma Chain. These two companies, the CFTC claims, have been trading on Binance using 300 in-house accounts and they traded <\/span>against<\/span> Binance’s own users in the over-the-counter (OTC) markets.<\/span><\/li>\n
    • Only for the rich<\/b>: When the US government asked Binance to restrict US users from accessing services on its platform. The exchange restricted ordinary customers while allowing wealthy ones to continue accessing the platform. These were VIP customers and High-net-worth individuals (HNWIs). CFTC alleges that even Binance employees advised these customers on the “best methods for evading Binance’s compliance controls.<\/span><\/li>\n
    • Erasing Evidence: <\/b>The lawsuit also claims that Binance’s employees used a messaging application that automatically deleted messages when dealing with the said US customers. This was done because Binance wanted to avoid “leaving any evidence” that they were working with customers from the US.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n

      Binance CEO’s Response To The CFTC Lawsuit<\/span><\/h2>\n

      Initially, Binance CEO Changpeng Zhao responded to these allegations with just one word (or rather one number) – 4.<\/span><\/p>\n

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      4<\/p>\n

      — CZ 🔶 BNB (@cz_binance) March 27, 2023<\/a><\/p><\/blockquote>\n