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FameEX Hot Topics | US Authorities Charge Binance, a Cryptocurrency Leader, and its CEO with Regulatory Violations

2023-03-28 10:54:00

Binance, one of the largest cryptocurrency exchanges in the world, and its CEO Changpeng Zhao, have been charged by the Commodity Futures Trading Commission (CFTC) for offering and executing commodity derivatives transactions on behalf of US clients, in violation of US law. The CFTC has claimed that Binance’s compliance program has been “ineffective” and that Zhao directed employees and customers to circumvent compliance controls. The former chief compliance officer of Binance, Samuel Lim, has also been accused of “aiding and abetting” the company’s violations.

The CFTC is responsible for the oversight of commodities and derivatives markets, including for Bitcoin, and requires firms to register with the agency to facilitate US customers’ trading of such products. The lawsuit is part of a recent crackdown by US regulators on crypto companies, which has increased significantly in recent years. Prosecutors and civil investigators have been targeting crypto firms for illegal offerings and failures to comply with rules designed to prevent illicit activity. The US Justice Department has been investigating Binance since 2018 for possible money-laundering and sanctions violations, according to a Reuters report from December. The company has allegedly processed at least $10 billion in payments for criminals and companies seeking to evade US sanctions.

After the news of the charges, Bitcoin prices plunged below $27,000 on the Coinbase exchange, dropping to $26,525, its lowest point since March 17. Binance’s cryptocurrency BNB, the world’s fourth-largest by market size, also dropped around 4%. Zhao, a billionaire who was born in China and moved to Canada at the age of 12, has not yet directly addressed the CFTC’s allegations. This move by the CFTC is the latest in a series of regulatory actions against crypto companies. In February, BitMEX, a cryptocurrency derivatives exchange, agreed to pay $100 million to settle charges of violating anti-money laundering rules. In December, Ripple Labs, the issuer of the XRP cryptocurrency, was sued by the Securities and Exchange Commission for conducting an unregistered securities offering worth $1.3 billion.

The charges against Binance and its CEO highlight the need for greater regulatory oversight in the cryptocurrency industry. As cryptocurrencies continue to gain mainstream acceptance and more investors pour money into them, it is imperative that regulators take steps to protect consumers and prevent illicit activity.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.

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