The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance, the world’s largest cryptocurrency exchange, and two senior executives, alleging that they had violated U.S. financial market laws by knowingly disregarding them while seeking business from American investors. The CFTC is seeking fines and wants to permanently bar Binance, its founder Changpeng Zhao, former chief compliance officer Samuel Lim, and their associates from participating in trading commodities in markets governed by U.S. exchange laws.
The regulators accused Mr. Zhao and Mr. Lim of relying on an “opaque web of corporate entities” to direct business back to a central operation that Mr. Zhao controlled. They even helped U.S.-based crypto traders hide their real locations using shell companies, according to the CFTC. The regulator cited significant lapses in Binance’s “know your customer” protections and the company’s solicitation of U.S. customers without ever being registered with the CFTC.
In a blog post, Mr. Zhao called the complaint “unexpected and disappointing” and denied that Binance served U.S. customers. The CFTC’s lawsuit is the latest in a series of blows to the cryptocurrency industry, including the collapse of the second-largest cryptocurrency exchange, FTX, and federal charges against its founder Sam Bankman-Fried. The CFTC’s move appears to be an attempt to assert its authority over the crypto trading world while competing with the Securities and Exchange Commission. Coinbase, a U.S.-regulated crypto exchange, also recently received an official notification from the SEC that the agency was planning on bringing an enforcement action against the company.