Feds suing crypto giant Binance and its founder Changpeng Zhao

In addition to suing Zhao, the CTFC is also accusing Samuel Lim, Binance’s former chief compliance officer, of allegedly “aiding and abetting Binance violations through intentional conduct that undermined Binance’s compliance program. “. The agency claims that Zhao, Lim, and other executives “failed to properly oversee Binance’s activities” and “actively facilitate violations of US law” as a result.

The lawsuit also focuses on some of the internal conversations brought to light by a report of The Wall Street Journal earlier this month, alleging that Binance “asked” its customers in the United States to use virtual private networks (VPNs) to hide their locations in order to trade on the platform.

While Binance itself does not operate in the United States, its subsidiary Binance.US, which operates as a separate entity, does. Binance has been criticized in the past for having a business that is essentially a “black box” due to how secretive Zhao has been about company operations – and where the company is actually based.

“Binance’s reliance on a maze of corporate entities to operate the Binance platform is deliberate; it is designed to obfuscate ownership, control, and location of the Binance platform,” the lawsuit states. “Binance is so good at obfuscating its location and the identities of its operating companies that it even confused its own Chief Strategy Officer.

The CTFC lawsuit against Zhao and other Binance executives reflects a broader federal crackdown on cryptocurrency following the collapse of FTX. FTX’s terminal slide began after Zhao announced that he would sell Binance’s stake in FTX’s token, FTT. This rattled investors, who withdrew their money from FTX. At first, Binance offered to bail out FTX, but Zhao withdrew that offer the next day. FTX then filed for bankruptcy.

“For years, Binance has known they violated CFTC rules, actively working both to keep money flowing and to avoid compliance,” CFTC Chairman Rostin Behnam said in a statement. . “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate the willful circumvention of US law.”

Coinbase, for example, is now subject to enforcement from the Securities and Exchange Commission – although the exact extent of this action is unclear. Additionally, the SEC sued Justin Sun (and an assortment of celebrities) for selling unregistered securities. Oh, and Terra/Luna villain Do Kwon may have just been arrested.

What I mean is that for a while it seemed like US financial authorities were taking a laissez-faire approach to fintech. But then the good times stopped rolling.