US regulators sue Binance, CEO over illegal exchange operations

March 28, 2023 (MLN): The U.S. Commodity Futures Trading Commission (CFTC) reportedly sued Binance, the world's largest cryptocurrency exchange on Monday, along with its CEO and founder Changpeng Zhao and former top compliance executive, for operating an "illegal" exchange and a "sham" compliance program.

The CFTC accused Binance of "willful evasion" of U.S. law and engaging in a "calculated strategy of regulatory arbitrage to their commercial benefit."

Binance's compliance program has been deemed "ineffective" and under Zhao's direction, the exchange told employees and customers to circumvent compliance controls. The CFTC also accused Binance's former Chief Compliance Officer Samuel Lim of "aiding and abetting" Binance's violations.

Binance has made "significant investments" to ensure it does not have U.S. users on its platform, but the CFTC said that Binance executives knew for years "they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance."

Binance's cryptocurrency BNB dropped around 4% on the news. The CFTC is seeking monetary penalties, disgorgement of ill-gotten gains and permanent trading and registration bans.

Binance, founded in Shanghai in 2017, processes trades worth about $23 trillion annually and sits at the heart of the global crypto industry. The exchange has never revealed the location of its core exchange, and its holding company is based in the Cayman Islands.

This lawsuit came amid a broader crackdown on crypto companies, with U.S. prosecutors and civil investigators targeting crypto firms for illegal offerings and failures to comply with rules designed to prevent illicit activity.

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