Binance, CEO sued by CFTC for trading violations; Bitcoin price stumbles
On Monday, the Commodities Futures Trading Commission sued Binance, the world’s largest cryptocurrency exchange, along with founder and CEO Changpeng Zhao, for violating rules on trading and derivatives. Bitcoin shed more than $1,000 on the latest US government crackdown on cryptocurrency firms, but came off a low.
X
Binance ‘Ignored Federal Laws’
Binance, Zhao and former Chief Compliance Officer Samuel Lim solicited US customers while failing to register and comply with regulatory requirements as part of their “ineffective compliance program,” according to the Northern District of Illinois lawsuit.
The exchange accepted margin, futures, options trading, swaps and leveraged transactions for “commodities” including bitcoin, ethereum and litecoin in July 2019. Binance solicited US retail and institutional clients while ignoring regulatory requirements under the direction of Zhao, the filing states.
In August 2020, Binance earned $63 million in fees from derivatives transactions. And 16% of the accounts were held by US customers. By May 2021, Binance’s monthly derivatives transaction revenue increased to $1.14 billion.
Binance never registered with the CFTC “in any capacity,” according to the filing. The exchange “disregarded federal laws,” including those requiring controls to prevent money laundering and the financing of terrorism, the agency claims.
Zhao and Binance’s senior management “actively facilitated violations of US law,” by “aiding and instructing” US customers to avoid compliance controls Binance allegedly implemented, the filing noted.
Cracking down on crypto
US regulators cracked down on crypto firms since the turn of the year.
On March 1, a group of US senators launched an investigation into Binance, Zhao and its domestic affiliate Binance.us for potential sanctions evasion, money laundering and unlicensed money transmission.
On March 22 Coin base (COIN) announced that it received a Wells notice from the Securities and Exchange Commission for potential securities violations. A Wells notice signals possible enforcement action is coming
COIN stock plunged 14% on March 23 following the SEC Wells alert. Shares fell 9% on Monday’s Binance news.
Elsewhere, crypto exchange Kraken paid $30 million to the SEC in early February to settle allegations of selling unregistered securities.
Bitcoin price retreated 4% during the day following the news, falling to $26,684 before recovering above $27,000. Ethereum fell 4%, falling as low as $1,691 before reversing back to $1,720. Both are down more than 2 percent.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
YOU MIGHT ALSO LIKE:
Cryptocurrency prices and news
What is cryptocurrency?
Get stock lists, stock ratings and more with IBD Digital
Find stocks to buy and watch with the IBD Leaderboard
Identify bases and buy points with MarketSmith pattern recognition
