binance: Binance sued by US watchdog for alleged derivatives rule lapses

The CFTC filed the lawsuit Monday in federal court in Chicago. The derivatives regulator said Binance shirked its obligations by not properly registering with it.

Representatives for Binance and Zhao, who is known as CZ, didn’t immediately respond to a request for comment.

“Defendants have disregarded applicable federal laws while fostering Binance’s US customer base because it has been profitable for them to do so,” the CFTC said in its complaint.

Since at least 2021, the CFTC has been probing Binance over whether it failed to keep US residents from buying and selling crypto derivatives. CFTC rules generally require platforms to register with the agency if they let Americans trade those products.

The regulator is one of several US bodies that have been investigating Binance’s activities. The Internal Revenue Service, as well as federal prosecutors, have been examining Binance’s compliance with anti-money laundering obligations, Bloomberg News has reported. The Securities and Exchange Commission has been scrutinizing whether the exchange has supported the trading of unregistered securities.

Discover the stories of your interest

The case is a significant blow to Zhao, as well as Binance. It represents the most significant move yet by the US to clamp down on the exchange. Explosive growth

Binance, which exploded onto the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge after last November’s collapse of FTX. However, the company has argued that the global exchange is not subject to US jurisdiction because it has no headquarters.

Binance has also been publicly signaling that it expected to settle with US authorities probing its business practices, and that it closed compliance gaps that existed in its early years.

In a recent 14-page letter to US senators including Elizabeth Warren, Chief Strategy Officer Patrick Hillmann detailed Binance’s work to build out its compliance program and team, but didn’t provide details on the company’s finances that the lawmakers had requested. Separately, Hillmann recently said the company had compliance gaps in its early years that it has since closed, and that it wants to settle with the regulators.

The CFTC filed the lawsuit Monday in federal court in Chicago. The derivatives regulator said Binance shirked its obligations by not properly registering with it.

Representatives for Binance and Zhao, who is known as CZ, didn’t immediately respond to a request for comment.

“Defendants have disregarded applicable federal laws while fostering Binance’s US customer base because it has been profitable for them to do so,” the CFTC said in its complaint.

Since at least 2021, the CFTC has been probing Binance over whether it failed to keep US residents from buying and selling crypto derivatives. CFTC rules generally require platforms to register with the agency if they let Americans trade those products.

The regulator is one of several US bodies that have been investigating Binance’s activities. The Internal Revenue Service, as well as federal prosecutors, have been examining Binance’s compliance with anti-money laundering obligations, Bloomberg News has reported. The Securities and Exchange Commission has been scrutinizing whether the exchange has supported the trading of unregistered securities.

Discover the stories of your interest

The case is a significant blow to Zhao, as well as Binance. It represents the most significant move yet by the US to clamp down on the exchange. Explosive growth

Binance, which exploded onto the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge after last November’s collapse of FTX. However, the company has argued that the global exchange is not subject to US jurisdiction because it has no headquarters.

Binance has also been publicly signaling that it expected to settle with US authorities probing its business practices, and that it closed compliance gaps that existed in its early years.

In a recent 14-page letter to US senators including Elizabeth Warren, Chief Strategy Officer Patrick Hillmann detailed Binance’s work to build out its compliance program and team, but didn’t provide details on the company’s finances that the lawmakers had requested. Separately, Hillmann recently said the company had compliance gaps in its early years that it has since closed, and that it wants to settle with the regulators.