Now, CFTC is seeking a permanent trading and registration ban on Binance because the exchange supposedly lacks control over possible illicit transactions.
The legal saga around crypto exchange Binance and its CEO Changpeng Zhao (CZ) continues as Commodity Futures Trading Commission (CFTC) is now in talks with the exchange, hoping to find a “path forward” in the battle that started last month. Back in March, the regulator filed a complaint against Binance, its co-founder Changpeng Zhao, and its former chief compliance officer Samuel Lim, accusing them of soliciting users in the US to illegally trade derivatives.
Announcing the lawsuit, CFTC Chairman Rostin Behnam stated:
“For years, Binance knew they were violating CFTC rules, working actively to keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law.”
Now, CFTC is seeking a permanent trading and registration ban on Binance because the exchange supposedly lacks control over possible illicit transactions. Binance has been allegedly offering and executing commodity derivatives transactions to and for US customers since July 2019. According to CFTC, Binance’s compliance program has been ineffective, while its employees and clients have been instructed to circumvent compliance controls in order to maximize corporate profits.
CFTC Commissioner Kristin N. Johnson said:
“I want to be really careful not to prejudge what will actually happen in the litigation. And I want to say that typically, in the context of any litigation, we are always ready to have conversations and typically even ahead of the litigation. We’ve been in continuing conversations with the business to describe what we understand is potentially problematic conduct and to give them an opportunity to explain that conduct and to help us find a path forward.”
However, seems that Binance is not really willing to collaborate with the regulators, and the negotiations have not succeeded.
“As of the moment, we can conclude that there is not immediate path forward. That doesn’t mean there couldn’t be one and hopefully there will be one,” added Kristin N. Johnson.
While Changpeng Zhao is rejecting claims about violating the law, the CTFC is planning to use a provision from the 2010 Dodd-Frank Act that focuses on the anti-evasion principle and prevents entities from conducting overseas business that can attract or solicit US investors.
Binance in Legal Trouble
Along with getting into a legal battle with CFTC, Binance has also faced another class action lawsuit from the Moskowitz Law Firm and Boies Schiller Flexner. The two companies claimed they had lost money while trading digital assets promoted by Binance and the influencers – Miami Heat basketball player Jimmy Butler, content creator Ben Armstrong (known as BitBoy Crypto), and real estate YouTuber Graham Stephan. As a result, the law firms filed a $1 billion lawsuit in the Southern District of Florida.
In 2022, Binance was also in hot water as a group of investors accused the exchange of being responsible for losses incurred in 2021 at crucial trading times. In particular, the Binance platform allegedly went offline multiple times and locked users out of the exchange. As a result, the investors were prevented from changing their trading positions, leading to losses worth “tens of millions.”
The company was also sued over the sales of unregistered LUNA and UST securities and misleading people into purchasing them.