The CFTC files a civil lawsuit against Binance for allegedly violating U.S. commodities regulations.
Binance's founder, Chanpeng Zhao, and former employee, Samuel Lim, were also sued.
Five important details you need to know.
The Commodity Future Trading Commission (CFTC) has filed a civil lawsuit in the U.S. District Court against numerous Binance entities, including the founder, Changpeng 'CZ' Zhao, and its former chief compliance administrator, Samuel Lim.
The crypto exchange was accused by the CFTC of taking a "calculated, phased approach" to wilfully disregard U.S. commodities laws.
Rosnim Behnam, the chairman of CFTC, commented, "For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance."
Consequently, the lawsuit seeks civil financial penalties, disgorgement, permanent trading, registration bans, etc., against the company.
In the 74-page lawsuit are several allegations that the company has firmly refuted. However, some details need to be emphasized.
Here are five facts that you probably skipped from the lawsuit.
Without revealing how, the CFTC retrieved a couple of the company's communications, as well as personal chats and the contents of Changpeng Zhao's (CZ) phone. The CFTC said that
Zhao has communicated over Signal with the auto-delete functionality enabled with numerous Binance officers, employees, and agents for widely varying purposes."
Logically, CZ's phone was accessed, and many are left guessing how it happened.
CFTC claimed that the company had links to terrorism, with its employees in the know.
Internally, Binance officers, employees, and agents have acknowledged that the Binance platform has facilitated potentially illegal activities."
This was in reference to a February 2019 incident wherein former chief compliance administrator Samuel Lim got wind of information about Hamas — a terrorist organization — transactions.
The CFTC categorized Ether (ETH), Bitcoin (BTC), Litecoin (LTC), Binance USD (BUSD), and Tether (USDT) as commodities. For a prolonged period now, the SEC has maintained that BUSD is an unregistered security and recently served its issuer, Paxos, a Wells notice.
With these two conflicting actions, many are left confused. Coinbase chief legal officer Paul Grewal heavily criticized the lack of harmony between the two regulatory bodies. This points to a larger issue as to which regulatory body will possess the superiority.
Binance was accused by the CFTC of being conversant with the U.S. regulatory laws (as evidenced by their chats) but turning a blind eye to them and making "deliberate, strategic decisions to evade federal law."
The CFTC alleged that the exchange supplied its "VIP customers prompt notification of any law enforcement inquiry concerning their account" and also egged them on to utilize virtual private networks (VPN) to access the platform via the website or app.
Despite the numerous accusations against them, Binance has maintained its innocence. CZ responded disappointedly, saying that the company has complied with the SEC for the previous two years, while the CFTC is confident of its claims.
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