The regulator’s lawsuit comes amid a broader and increasingly high-profile crackdown on crypto companies. For years, US prosecutors and civil investigators have targeted crypto firms for illegal offerings and failures to comply with rules designed to prevent illicit activity. But the pace of such government activity has surged recently. The CFTC said in its complaint on Monday that from at least July 2019 to the present, Binance “offered and executed commodity derivatives transactions on behalf of US persons,” in violation of US laws.
Binance’s compliance programme has been “ineffective” and the firm, under the direction of Zhao, told employees and customers to circumvent compliance controls, the CFTC said, citing a number of practices first reported by Reuters in a series of investigations into the exchange last year. The CFTC also accused Binance’s former chief compliance officer Samuel Lim of “aiding and abetting” Binance’s violations. Lim did not immediately respond to calls and messages from Reuters. CFTC chairman Rostin Behnam said in a statement that Binance executives knew for years “they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance.”
The CFTC is responsible for oversight of commodities and derivatives markets, including for Bitcoin. Firms such as brokers that facilitate US customers’ trading of such products are required to be register with the agency. Reuters reported in December that the US Justice Department had been investigating Binance since 2018 for possible money-laundering and sanctions violations. Binance has processed at least US$10 billion (S$13.3 billion) in payments for criminals and companies seeking to evade US sanctions, Reuters has found. Bitcoin plunged below US$27,000 after the news, dropping to US$26,525, its lowest point since March 17 on the Coinbase exchange. The token was trading at US$27,078.27, down 3.2 per cent at 8.40am.
Binance’s cryptocurrency BNB, the world’s fourth largest by market size, dropped around 4 per cent on the news. 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.
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