Crypto Platform Binance Sued by CFTC Over ‘Secret Plot’ to Evade US Laws

Tom Ozimek
By Tom Ozimek
March 29, 2023US News

The Commodity Futures Trading Commission (CFTC) is suing crypto platform Binance and several top executives, alleging that they offered unregistered crypto futures and other derivatives for trading in the United States in violation of U.S. laws and devised a “secret plot” to help customers evade restrictions.

Binance stands accused of running a cryptocurrency derivatives-trading operation in the United States without properly registering it, in violation of CFTC regulations and the Commodity Exchange Act, according to the complaint (pdf) filed on March 27 in the U.S. District Court for the Northern District of Illinois.

Changpeng Zhao, co-founder and CEO of Binance, and Samuel Lim, the company’s former chief compliance officer, are also named in the lawsuit. It accuses them of falsely claiming to be restricting Americans from using the platform while in reality they were using a “calculated, phased approach” to increase Binance’s presence in the United States.

“On the surface, we cannot be seen to have U.S. users, but in reality we should get them through other creative means,” Lim allegedly said in a chat with a Binance employee, according to the complaint.

The CFTC said in a statement that Zhao, who was allegedly responsible for all major strategic decisions at the crypto platform, devised a “secret plot to instruct U.S.-based VIP customers to evade Binance’s compliance controls” and instructed Binance staff to communicate about compliance evasion in a way that “facilitated the automatic destruction of evidence.”

A Binance spokesperson told The Epoch Times in an emailed statement that the filing is “unexpected and disappointing” and that the company has made “significant investments over the past two years to ensure we do not have U.S. users active on our platform.”

“The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime,” the spokesperson added.

Zhao took to Twitter after the lawsuit was announced and posted the number “4,” which, according to a previous message of his, refers to “ignore FUD, fake news, attacks, etc.” FUD stands for fear, uncertainty, and doubt.

More Details

The CFTC is also accusing the platform of establishing a complex network of companies meant to hide the true scope and nature of its operations.

“Binance’s reliance on a maze of corporate entities to operate the Binance platform is deliberate; it is designed to obscure the ownership, control, and location of the Binance platform,” the complaint reads.

The lawsuit accuses the defendants of intentional violations of U.S. law, including helping customers dodge compliance controls in a bid to maximize corporate profits.

“Binance and its officers, employees, and agents have instructed U.S. customers to use virtual private networks (VPNs) to obscure their location; and allowed customers that had not submitted proof of their identity and location to continue to trade on the platform long after announcing such conduct was prohibited,” the complaint reads.

It also accuses the defendants of having “directed VIP customers with the ultimate beneficial owners, key employees who control trading decisions, trading algorithms, and other assets all located in the United States to open Binance accounts under the name of newly incorporated shell companies to evade Binance’s compliance controls.”

The CFTC and other federal agencies have been investigating Binance for years, with the CFTC alleging that the platform offered and executed cryptocurrency derivatives transactions to and from U.S.-based individuals in violation of U.S. laws since at least 2019.

“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law,” CFTC Chairman Rostin Behnam said in a statement.

In a different statement, CFTC Chief Counsel Gretchen Lowe called Binance’s actions “willful evasion” of U.S. laws, accusing the company’s compliance efforts of being a “sham.”

“Today’s enforcement action reflects that the CFTC and its Enforcement Division will pursue those digital asset platforms and individuals who flout and actively attempt to circumvent CFTC regulatory requirements,” she said.

This article has been updated with comments from a Binance spokesperson.

From The Epoch Times

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