Crypto exchange Binance and its CEO have been sued by the CFTC.
The regulatory agency filed the lawsuit Monday in US district court for the Northern District of Illinois. The CFTC alleges that the executive and his company broke trading and derivatives laws.
Binance CEO Changpeng Zhao and Samuel Lim, Binance’s former chief compliance officer, are named in the complaint as defendants.
Binance has executed commodity derivatives transactions to and for people in the US since July 2019, the CFTC alleges. But the company did not require its customers to provide identity-verifying information and failed to put in place compliance procedures, according to the lawsuit.
According to the complaint, “Binance, under Zhao’s direction and control and with Lim’s willful and substantial assistance, has solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, options, swaps, and leveraged retail commodity transactions involving digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.”
A Binance spokesperson did not immediately return a request for comment. BNB coin (BNB), the native token launched by Binance in July 2017, was trading down -4.5% through 11:46 am ET on the news.
CFTC Chair Rostin Behnam said in a statement that the US commodities overseer is looking to continue to regulate what he called the “volatile and risky” digital asset market. The CFTC also is in charge of regulating derivative products, including financial instruments tied to commodities.
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance,” Behnam 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.” .
The crypto exchange has previously been investigated by the US Justice Department to discover whether Binance violated the Bank Secrecy Act, Reuters reported last year. A spokesperson said at the time the company “[works] with agencies regularly to address any outstanding questions,” but did not comment on whether it was being investigated for violating act.
The reported action is the latest in a string of measures taken by US regulators against large crypto players in recent weeks.
The SEC served Coinbase with a Wells notice last week for alleged securities violations. The company’s CEO, Brian Armstrong, said the next day Coinbase would be happy to take the commission to court if necessary to defend itself and other industry firms.
Zhao reacted to the news on Twitter with the number “4”, which he has previously indicated means that he considers the news to be either fake, or ‘“FUD” (fear, uncertainty, and doubt).
This is a developing story.
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Source: https://blockworks.co/news/bitcoin-and-ether-are-commodities-says-cftc-in-binance-lawsuit