Binance, the world’s largest cryptocurrency exchange, and its founder and CEO, Changpeng Zhao, were sued by the US Commodity Futures Trading Commission (CFTC) on Monday.
The regulator accused Binance of operating an “illegal” exchange and a “sham” compliance program, and sued Changpeng Zhao and its former top compliance executive for “willful evasion” of US law.
The CFTC alleged that Binance offered and executed commodity derivatives transactions on behalf of US persons in violation of US laws, and that its compliance program has been “ineffective” and the firm told employees and customers to circumvent compliance controls, Reuters news report said.
The CFTC is seeking monetary penalties, disgorgement of ill-gotten gains, and permanent trading and registration bans.
Changpeng Zhao, a billionaire originally from China who moved to Canada at the age of 12, expressed his disappointment and surprise at the complaint filed by the CFTC.
Changpeng Zhao in a news statement said that the complaint contained incomplete facts and that they did not agree with many of the allegations made. The lawsuit is part of an ongoing crackdown on crypto companies by U.S. prosecutors and civil investigators, which has intensified in recent years.
The CFTC accused Binance, which dominates the global digital asset sector, of offering and executing commodity derivatives transactions on behalf of U.S. persons, which violated U.S. laws. The CFTC also claimed that Binance’s compliance program had been ineffective and that the firm, under Zhao’s direction, instructed employees and customers to circumvent compliance controls.
Binance’s former Chief Compliance Officer, Samuel Lim, was accused of aiding and abetting Binance’s violations. Binance, which has made significant investments to prevent U.S. users from accessing its platform, stated that they will continue to collaborate with regulators.
CFTC Chairman Rostin Behnam said that Binance executives knew they were violating CFTC rules for years and actively worked to avoid compliance. The CFTC is responsible for the oversight of commodities and derivatives markets, including for Bitcoin. Firms like brokers that facilitate U.S. customers’ trading of such products are required to register with the agency.
Binance has been under investigation since 2018 by the U.S. Justice Department for possible money-laundering and sanctions violations.
The CFTC charged Binance’s holding company and two other Binance units, stating that the firm failed to implement basic compliance procedures to prevent and detect terrorist financing and money laundering.
The CFTC’s complaint detailed Binance’s efforts to retain U.S. customers despite stating that they were restricting them from trading on their platform.