U.S. regulator initiates law suit against Binance for breaking trading regulations

FILE PHOTO: A composition showing crypto currency with the Binance logo. Picture taken on Nov. 10, 2022. REUTERS/Dado Ruvic

The US Commodities Futures Trading Commission (CFTC) has filed a lawsuit against cryptocurrency exchange Binance and its CEO and founder Changpeng Zhao for allegedly breaking US trading and derivatives laws.

The action is the biggest US enforcement measure taken against the biggest cryptocurrency exchange to date.

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According to The lawsuit (pdf) by Qz.com, accuses Binance employees of explicitly encouraging certain customers to use illegal VPNs for trades, while directing customers designated as important to set up shell companies in places like the British Virgin Islands and the Netherlands to avoid US trading restrictions.

The CTFC charged Binance with a number of additional violations, including failing to register as a futures commissions merchant, poorly supervising its business, and failing to implement routine processes for sniffing out money-laundering by customers.

In the complaint, it is alleged that Binance instructed some of its most important US clients on how to get around its compliance measures even after it announced US restrictions.

Binance made attempts to grow its footprint in the U.S. despite claims that the exchange would prevent U.S. residents from accessing Binance’s platform, the lawsuit said, adding that the crypto exchange has taken “a calculated, phased approach to increase its U.S presence despite publicly stating its purported intent to ‘block’ or ‘restrict’ customers located in the United States from accessing its platform”. 

With Monday’s announcement, the two biggest cryptocurrencies by market capitalization—Bitcoin and Ethereum—fell.