CFTC alleges that CEO Zhao and his associates directed employees to engage in activities that violated US law.
"I am not a person who advocates for anarchy. I do not believe that humanity is advanced enough to live in a world without rules," said Changpeng Zhao, CEO of the Binance cryptocurrency exchange.
However, according to Bloomberg, the Commodity Futures Trading Commission (CFTC) has sued Binance CEO Zhao and former senior director Samuel Lim for violating derivatives trading regulations.
Specifically, the authorities accuse the two executives of violating eight core provisions of the Commodity Exchange Act (CEA), including provisions designed to prevent and detect money laundering and terrorist financing activities.
Bloomberg reports that the focus of the lawsuit is on Binance's failure to register as a derivatives exchange in the US, thereby avoiding CFTC oversight. Moreover, CEO Zhao deliberately structured his business and trading operations to evade regulatory scrutiny.
The CFTC has accused CEO Zhao and his colleagues at Binance of instructing staff to carry out actions that violate U.S. law, including instructing U.S. cryptocurrency traders to use virtual private networks (VPNs) to hide their IP addresses or suggesting that VIP customers open Binance accounts under a shell company name to avoid government tracking.
According to documents provided by the CFTC, Binance had earned $63 million in trading fees from derivatives as of August 2020, and about 16% of trading accounts were from U.S. customers who were not under the agency's control.
The CFTC even accused Binance of asking VIP customers to hide assets from the platform when asked to freeze some accounts for investigation.
“Don't tell VIP clients directly to run. If they are big or smart traders, they will receive hints,” Binance instructed its VIP brokers, according to CFTC allegations.
The world is closely monitoring the situation of the most powerful cryptocurrency billionaire as he himself is accused of breaking the rules.
CNBC suggests that this move is a sign of tightening regulation of cryptocurrency trading in the United States. The CFTC has requested a court order permanently banning Binance to prevent further violations of the law in cryptocurrency trading and other related products.
CFTC is continuing to expand its investigation into Binance's revenue, profits, salaries, and other transactions to look for violations.
"I want to make it clear that CFTC will continue to use all its powers to investigate and prevent wrongdoing related to the cryptocurrency market," said CFTC Chairman Rostin Benham.
"This is an extremely serious allegation. Regulatory agencies are seeking a permanent injunction against both CEO Zhao and the Binance cryptocurrency exchange to prevent them from continuing to operate in the US, including registering a business or conducting other commodity transactions on US soil," said former CFTC Chairman Tim Massad.
Reaction
Just a few hours after the CFTC lawsuit, CEO Zhao issued a statement declaring that the allegations were not a full presentation of the facts, and that Binance had closely cooperated with US law enforcement agencies to freeze $160 million as requested.
At the same time, on Twitter, the billionaire also warned investors to be cautious of false information about the market in order to avoid psychological impact.
Additionally, CEO Zhao asserted that his Binance exchange did not benefit unfairly from any manipulated trades that violated the law.
According to Bloomberg, Zhao's estimated net worth is around $28 billion, with most of it in the form of digital assets. He is a major competitor of Sam Bankman-Fried, the founder of the FTX crypto exchange, who was recently arrested for fraud and could face life in prison.
"Over the past week, the CFTC has sued Binance while the US Securities and Exchange Commission (SEC) has signaled it may sue Coinbase. In any event, the regulators could force these crypto exchanges to leave the US and operate only overseas," said Professor John Coffee of Columbia Law School.
*Source: Bloomberg, CNBC
Information on cryptocurrency is not legally recognized in Vietnam. The information in this article is for reference only and does not constitute investment advice.
