By Charlie Conchie
The chief of crypto exchange Binance has been sued by a US regulator today over a series of alleged trading rule violations, including helping customers evade its own compliance controls.
The Commodity Futures Trading Commission has accused Binance and its chief Changpeng Zhao, known as ‘CZ’, of multiple breaches of the commodity exchange act, including failing to properly register with the watchdog.
The civil complaint also targets the firm’s former chief compliance officer Samuel Lim, accusing him of “aiding and abetting” Binance’s violations.
The move has the potential to cause major disruption for the US operations of the world’s biggest crypto exchange, as the CFTC said it was considering seeking financial penalties and even permanent trading and registration bans as potential punishments for the alleged breaches.
“Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market,” CFTC Chairman Rostin Behnam said.
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” he said.
“This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law,” he added.
Among the host of allegations against CZ and Lim, the CFTC said Binance did not require its customers to provide any information to verify their identities before trading on the platform, despite the legal duty to collect such information.
It added that Binance failed to implement “basic compliance procedures designed to prevent and detect terrorist financing and money laundering.”
“The complaint further alleges that even after Binance purported to restrict U.S. customers from trading on its platform, Binance instructed its customers – in particular its commercially valuable US-based VIP customers – on the best methods for evading Binance’s compliance controls,” the watchdog said in its statement.
Binance wasn’t immediately available to comment.
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