Binance at risk of being fined hundreds of millions of dollars

If you live in the US, you are not allowed to trade crypto derivatives. And if you are a large international platform for trading crypto derivatives, you cannot let Americans trade those products if you are not registered with the US Commodity Futures Trading Commission (CFTC).

On March 27, the CFTC filed a lawsuit against Binance, the world's largest cryptocurrency exchange, for the above reasons.

The CFTC accused CEO Changpeng Zhao (CZ) and his crypto empire of failing to register with the agency, and of routinely violating US derivatives rules while growing Binance into the world's largest trading platform.

Additionally, Binance “instructed its employees and customers to avoid compliance measures to maximize the company’s profits,” according to the CFTC.

Binance also failed to implement an effective anti-money laundering program and failed to establish the necessary safeguards to determine the true identity of its customers, the CFTC alleges.

World - Binance at risk of being fined hundreds of millions of dollars — Binance CEO Changpeng Zhao. Photo: Fox News

Binance documents show that the platform earned $63 million in fees from derivatives trading in August 2020, and about 16% of accounts on the platform were identified as belonging to US customers, the CFTC said.

Additionally, former Binance compliance chief Samuel Lim and other senior executives were also accused of “failing to properly supervise Binance’s operations” and as a result “actively facilitating violations of US law,” such as instructing US customers to use virtual private networks (VPNs) to conceal their locations, and instructing US-related “VIP customers” (typically institutional market participants) to open Binance accounts under the names of shell companies.

On March 27, CZ wrote the number “4” on Twitter, implying that people should ignore FUD (fear, uncertainty, and doubt), fake news, and attacks.

Meanwhile, a Binance spokesperson said, “This lawsuit comes as a surprise and is disappointing to us, as we have been cooperating with the CFTC for over two years. However, we will continue to work with regulators in the US and around the world to develop a clear and comprehensive regulatory regime.”

Binance has long argued that the exchange is not subject to US law because it is not headquartered in the US. CZ has stated that the company's headquarters are wherever he is, at any given time.

According to the CFTC, this “reflects a deliberate approach to trying to evade regulation.” The CFTC cannot bring criminal charges, but can impose heavy fines, even banning Binance from registering in the US in the future.

World - Binance is at risk of being fined hundreds of millions of dollars (Figure 2). — The US Commodity Futures Trading Commission (CFTC) accused Binance of deliberately violating US law. Photo: CoinDesk

According to Timothy Cradle, an expert at Blockchain Intelligence Group, Binance could be fined hundreds of millions of dollars and banned from registering as a derivatives exchange in the future. This would be a “fatal blow” to their service users in the US and significantly affect Binance’s revenue.

Since 2021, the CFTC has been investigating Binance over whether the exchange is preventing Americans from trading cryptocurrency derivatives. The CFTC is just one of several U.S. agencies investigating Binance's activities.

The Internal Revenue Service (IRS) and US federal prosecutors have been examining Binance's compliance with anti-money laundering rules. In addition, the US Securities and Exchange Commission has also been closely examining whether Binance facilitates the trading of unregistered securities .

Nguyen Tuyet (According to CNN, Bloomberg, The Verge)

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