The world’s largest crypto exchange, Binance, and its CEO and founder Changpeng Zhao were sued by the US Commodity Futures Trading Commission (CFTC) on Monday for operating what the regulator called an “illegal” exchange and “fictitious” compliance program.
The CFTC sued Binance, Mr. Zhao and its former top compliance officer for “deliberate evasion” of US law, “while engaging in a calculated strategy of regulatory arbitrage to their business advantage.”
Mr. Zhao, a Chinese-born billionaire who came to Canada at the age of 12, called the CFTC’s complaint “unexpected and disappointing.”
“After an initial review, the complaint appears to contain an incomplete statement of facts, and we disagree with the characterization of many of the issues alleged in the complaint,” Zhao said in a statement.
The lawsuit comes amid a broader and increasingly high-profile crackdown on crypto companies. For years, US prosecutors and civilian investigators have targeted crypto firms for illegal offerings and breaches of rules designed to prevent illicit activity. But the pace of these government activities has recently increased.
The CFTC said in its complaint that from at least July 2019 to the present, Binance “has offered and executed commodity derivatives transactions on behalf of U.S. persons” in violation of U.S. laws.
Binance’s compliance program was “ineffective” and the company, under Mr. Zhao, told employees and customers to circumvent compliance checks, the CFTC said, citing a number of reported practices for the first time by Reuters in a series of surveys on the exchange last time. year.
The CFTC is responsible for overseeing commodity and derivatives markets, including bitcoin
The CFTC also accused former Binance compliance officer Samuel Lim of “aiding and abetting” Binance violations. Mr. Lim did not immediately respond to calls and messages from Reuters.
A spokesperson for Binance, which dominates the global digital asset industry, said the company will continue to “collaborate” with regulators.
Binance has made “significant investments” to ensure there are no US users on its platform, the spokesperson said.
CFTC Chairman Rostin Behnam said in a statement that Binance executives have known for years “that they violated CFTC rules, working actively both to keep money flowing and to avoid conformity”.
The CFTC is responsible for overseeing commodity and derivatives markets, including bitcoin. Companies such as brokers that facilitate the trading of these products by US clients are required to register with the agency.
Reuters reported in December that the US Department of Justice had been investigating Binance since 2018 for possible money laundering and sanctions violations.
