Major US financial market regulatory agency the Commodity Futures Trading Commission (CFTC) is suing Binance and its founder Changpeng Zhao.
That’s according to a lawsuit filed by the CFTC on Monday accusing Binance and its founder of knowingly offering unregistered crypto derivative products in the US in transgression of the law.
The CFTC says that Binance offered derivative trading options for the likes of Bitcoin, Ether, Litecoin, Tether and Binance USD, all of which the CFTC claims are commodities.
“Since the launch of its platform in 2017, Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to “block” or “restrict” customers located in the United States from accessing its platform,” the CFTC said.
“Binance, Zhao…, and Lim, the platform’s former Chief Compliance Officer (“CCO”), have each known that Binance’s solicitation of customers located in the United States subjected Binance to registration and regulatory requirements under US law,” the CFTC continues.
“But Binance, Zhao, and Lim have all chosen to ignore those requirements and undermined Binance’s ineffective compliance program by taking steps to help customers evade Binance’s access controls.”
The CFTC’s lawsuit comes after a lengthy investigation conducted by the agency into Binance that began back in 2021.
Binance Faces Wall of US Lawsuits/Enforcement Action
Binance is also under investigation by the US Internal Revenue Service and various federal prosecutors over concerns about poor adherence to Anti-Money Laundering (AML) and Know Your Customer (KYC) controls.
The CFTC suit touches on these themes. Citing chat logs, it claims that sanctioned entities and users from sanctioned regimes used the platform, with CCO Lim saying that “terrorists usually send ‘small sums’” and that other customers were “here for crime”.
Binance is also being investigated by the US Securities and Exchange Commission over whether the exchange allowed US traders to access unregistered securities.
Back in February, Binance’s Chief Strategy Officer Patrick Hillman admitted that the exchange expects to pay various fines amid multiple ongoing investigations to “make amends” for prior regulatory violations.
With Binance facing a storm of regulatory action, past attempts made by the exchange to woo various regulators appear not to have come to fruition.