In an extraordinary turn of events, the CFTC filed a complaint against Binance, alleging “Willful Evasion” of U.S. regulations and the sale of unregistered crypto derivative products.
Filed in the U.S. District Court for the Northern District of Illinois, the regulator claimed that Binance has undertaken a “calculated approach to increase its presence despite publicly stating its purported intent to block or restrict customers located in the United States from accessing its platform”.
The CFTC alleged that Binance initially concentrated on seeking out retail customers in the United States.
It then gradually started to rely on staff and suppliers in the US and actively pursued lucrative and strategically valuable “VIP” customers, including institutional customers, who were based in the US.
The complainant also alleged that the top exchange has flouted federal laws by not registering with the commission.
Despite Binance’s solicitation of and reliance on customers located in the United States to generate revenue and provide liquidity for its various markets, Binance has never been registered with the CFTC in any capacity and has disregarded federal laws essential to the integrity and vitality of the U.S. financial markets.
Changpeng Zhao, also known as C.Z., the CEO of Binance, responded by making a public statement on its website.
C.Z dismissed the CFTC’s civil lawsuit as an ” incomplete recitation of facts” and called it unexpected after cooperating with the agency for more than two years.
Binance Would Come Out With A Detailed Response Soon
While stating that a full response would be given in due course, the CEO also addressed a few major concerns in the blog.
In response to the charge that the exchange secretly permitted US users, CZ argued that the firm adheres to the highest standards in KYC and AML, and has blocked US users based on their nationality [KYC], IP [including VPN endpoints outside of the US], bank and blockchain deposits and withdrawals, and more.
In addition to that CZ revealed that employees are subjected to a 90-day no-day-trading rule, which prohibits them from selling or buying coins. Staff is not allowed to trade in futures as well.
Since the FTX meltdown, regulators have stepped up their enforcement campaigns against significant players in the crypto market, as evidenced by actions like Coinbase’s wells notice, Kraken’s suspension of US staking offerings, Do Kwon’s arrest, and TRON’s Justin Sun lawsuit.
However, a top exchange like Binance getting hammered has sent panic in the sector with some calling it as a dark day for crypto. The news caused Bitcoin, to drop below the $27k level and is still down by 3% at press time.