Binance and its CEO sued by US regulators
New York (CNN) Federal regulators sued Binance, the world’s largest cryptocurrency exchange, and its CEO for allegedly violating US trade laws and secretly instructing “VIP” customers on how to avoid compliance checks.
The Commodity Futures Trading Commission, which regulates U.S. derivatives trading, said the company and CEO Changpeng Zhao circumvented U.S. laws by offering unregistered crypto derivative products to Americans.
“Binance’s compliance program has been ineffective and, at Zhao’s direction, Binance has instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits,” the CFTC said in a statement.
The CFTC lawsuit calls for an undisclosed amount of fines and will ban Binance from registering in the US.
In a statement, Binance said the lawsuit was “unexpected and disappointing, as we have been cooperating with the CFTC for more than two years,” adding that it has made “significant investments” in that time to ensure that US-based investors are not active on the platform.
When news of the lawsuit broke Monday, Zhao said tweeted number 4, pointing to part of an earlier statement: “Ignore FUD, fake news, attacks, etc.” FUD is a commonly used acronym among crypto fans that stands for “fear, uncertainty, doubt.”
The prices of bitcoin and ethereum, the two most popular cryptocurrencies, fell more than 3% on Monday.
The lawsuit is the latest in a series of regulatory crackdowns on the crypto industry, which is still reeling from a turbulent year marked by plummeting digital asset prices, a string of bankruptcies and the catastrophic fall in November of FTX.
Binance, which briefly considered rescuing FTX as it began to spiral, has since sought to distance itself from the now-bankrupt exchange founded by Sam Bankman-Fried, who has pleaded not guilty to multiple federal counts of fraud and conspiracy.
Binance has long argued that it is not subject to US laws because it does not have a physical headquarters in America.
The lawsuit accuses Binance of instructing its employees to advise US customers on how to avoid trading controls through a messaging app that was set to automatically delete text exchanges.
“Even after Binance allegedly restricted US customers from trading on its platform, Binance instructed its customers – particularly its commercially valuable US-based VIP customers – on the best methods to avoid Binance’s compliance controls,” the CFTC said.
