On Monday, the US government escalated its crackdown on Binance Holdings Ltd., the world’s largest cryptocurrency trading platform, and its CEO, Changpeng Zhao, with its most significant action yet. The Commodity Futures Trading Commission (CFTC) filed a lawsuit in federal court in Chicago accusing Binance and CZ of repeatedly breaking American derivatives rules. The regulator alleges that Binance should have registered with the agency years ago and continues to violate the CFTC’s rules. Additionally, the CFTC has sued former Binance chief compliance officer Samuel Lim for breaking its rules.
The CFTC claims that CZ, Lim, and other senior managers failed to properly supervise Binance’s activities and instructed American customers to use virtual private networks (VPNs) to obscure their location.
Furthermore, the CFTC alleges that Binance did not establish necessary safeguards to determine the true identity of its customers, and failed to implement an effective anti-money laundering program. The regulator has been probing Binance since at least 2021 for failing to keep US residents from buying and selling crypto derivatives, which require platforms to register with the agency.
While the CFTC is a civil government agency and cannot bring criminal charges, its cases can result in significant fines and other penalties against companies and individuals.
Several other US bodies, including the Internal Revenue Service, federal prosecutors, and the Securities and Exchange Commission, have also been investigating Binance’s compliance with anti-money laundering obligations and whether the exchange supported the trading of unregistered securities. The case is ongoing, and the outcome remains to be seen.
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