The executives at Binance.US are concerned that the lawsuit filed by US regulators against Zhao Changpeng may hinder the company’s ability to obtain certain licenses.
In March, the CEO of Binance, Zhao Changpeng, and the company were sued by the US Commodity Futures Trading Commission for supposedly running an “illegal” exchange and a compliance program that was deemed to be fake.
According to two sources familiar with the matter, both the US regulators and Zhao Changpeng, the founder and majority owner of the company, have been exploring options to decrease his stake in the company.
Since last summer, Zhao, who also serves as the company’s CEO, has been attempting to sell some of his shares. In March, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against the company and Zhao, claiming that the exchange was operating illegally and that its compliance program was a fake.
The US Commodity Futures Trading Commission (CFTC) accused Binance, its former top compliance executive, and Zhao Changpeng of deliberately evading US law and employing a calculated strategy of regulatory arbitrage to benefit the company commercially.
Following the lawsuit, leaders at Binance.US have been discussing the possibility of reducing Zhao’s stake in the company in order to improve its relationship with US regulators, as stated by The Information.
Binance.US executives are worried that having Zhao as the majority owner may prevent the company from obtaining certain regulatory licenses in the US. At the time of writing, Binance.US has not responded to Reuters’ request for comment.
CFTC Charges Binance and Its Founder
On March 27, 2023, the Commodity Futures Trading Commission made an announcement that it had taken legal action against Changpeng Zhao and three entities that run the company, filing a civil enforcement action in the US District Court for the Northern District of Illinois.
The charges were for multiple violations of the Commodity Exchange Act (CEA) and CFTC regulations. The lawsuit also accused Samuel Lim, the company’s former chief compliance officer, of aiding and abetting the company’s violations.
According to the complaint, the company’s Holdings Limited, Holdings (IE) Limited, and Binance (Services) Holdings Limited (collectively referred to as “Binance”) operate the company’s centralized digital asset trading platform through a deliberately opaque common enterprise. Zhao serves as Binance’s owner and CEO.
The defendants are accused of intentionally disregarding the provisions of the CEA while pursuing a regulatory arbitrage strategy for their commercial benefit. The CFTC is seeking disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against any further violations of the CEA and CFTC regulations in its ongoing legal action against the defendants.