In yet another blow to the beleaguered cryptocurrency industry, the US Commodity Futures and Trading Commission (CFTC) has filed a complaint against Binance, its co-founder Changpeng Zhao and its former chief compliance officer Samuel Lim.
The complaint alleges that Binance solicited US users and evaded its own "ineffective compliance programme".
The filing has the potential to disrupt the exchange's operations and may be the first move in a regulatory crackdown on the company.
The CFTC alleges that Binance, Zhao and Lim violated eight provisions of the Commodity Exchange Act, including requirements for anti-money laundering and counter-terrorism financing controls. According to the complaint, Binance, Zhao, and Lim actively cultivated VIP customers, including institutional customers, located in the US. The regulator claims that Binance took steps to deliberately conceal the locations of its subsidiaries as part of a strategy to "keep countries clean".
The exchange's VIP programme for high-net worth individuals played a significant role in the alleged effort to solicit US users, according to the complaint. The CFTC claims that Binance's VIPs were offered special privileges when law enforcement agencies pursued them or froze their assets, and the exchange gave VIPs a heads up or suggested they move their assets off the platform.
In response to the filing, Zhao released a statement saying that he believed the allegations did not provide a complete picture of the facts. While, the exchange's spokesperson called the complaint "unexpected and disappointing" and reiterated Binance's commitment to respecting and collaborating with US and other regulators around the world.
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— CZ 🔶 BNB (@cz_binance) March 27, 2023
The CFTC's filing is a significant blow to Binance, which has faced regulatory scrutiny in other countries, including the UK and Japan. The exchange's legal troubles underscore the challenges facing cryptocurrency exchanges as they try to navigate an evolving regulatory landscape.
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