- The CFTC has dragged Binance to court for violating U.S. trading and derivatives laws.
- Binance’s CEO denied all allegations on the grounds that his exchange has placed a premium on compliance with major hires in the department.
- Binance subsidiaries Binance.US and Merit Peak have been roped into the CFTC’s allegation.
Binance becomes the latest entity to come within the CFTC’s crosshairs in a case that industry stakeholders say could have lasting impacts on the virtual currency ecosystem.
The U.S. Commodity Futures Trading Commission (CFTC) filed an action against Binance, accusing the digital asset exchange of improper compliance procedures in violation of the country’s derivative laws.
Changpeng Zhao refuted the allegations via a blog post within hours of the CFTC’s court filing where he described the case as “unexpected and disappointing.” CZ as he is popularly called noted that Binance has been cooperating with the CFTC for nearly two years and went on to describe the civil complaint as unnecessary.
In his defense, CZ claimed that transparency is the cornerstone of Binance activities as the firm has over 750 individuals in its global compliance teams. CZ added that the firm has responded to over 55,000 requests from law enforcement agencies which have led to the recovery of nearly $300 million in stolen funds over the last two years.
CZ’s post noted that Binance uses extensive Know Your Customer (KYC) procedures and anti-money laundering (AML) guardrails to stifle the operations of bad actors. Apart from using technology to ensure compliance, Binance claims to hold the most licenses out of its peers as it continues to expand on the present figures.
In responding to the claims of market manipulation, CZ clarified that Binance’s employees cannot sell a token within 90 days of purchase while individuals with knowledge of token listings are prevented from actively trading digital assets.
“We also prohibit our employees from trading in Futures,” wrote CZ. “Further, we have strict policies for anyone with access to private information, such as details of listings and Launchpad.”
A knack for going after the big fish
Market observers have noted that the CFTC has an impressive streak in taking down big digital asset firms unlike the Securities and Exchange Commission (SEC) with a penchant for taking down “small fries.”
“This will take time to play out but make no mistake, this is the CFTC going for the jugular,” said Adam Cochran, a partner at venture capital fund CEHV. “The CFTC doesn’t go after small frequent cases like the SEC. It’s a different beast and its cases are often fatal.”
The CFTC earned a massive victory against Tether and Bitfinex as it handed fines of $41 million and $5 million respectively to both virtual currency entities.