The CFTC has sued Binance and two of its executives, CEO Changpeng Zhao and Samuel Lim, Binance’s former chief compliance officer. In its complaint the regulatory agency has included numerous internal communications that it claims show deliberate obfuscation and efforts to sidestep regulation.
Here are some of the most damning quotes from the CFTC complaint.
That pesky OFAC problem
According to the complaint, in 2018 Lim acknowledged that Binance was operating “in the USA” and advised his colleagues that “there is no fking way in hell I am signing off as the cco for the ofac shit.”
The US Office of Foreign Assets Control (OFAC) administers and enforces trade sanctions, and much of the document produced by the CFTC is concerned with Binance’s alleged efforts to avoid such oversight.
Terrorists send small sums
The complaint alleges that in February 2019, “after receiving information “regarding HAMAS transactions” on Binance, Lim explained to a colleague that terrorists usually send “small sums” as “large sums constitute money laundering.” Lim’s colleague replied: “can barely buy an AK47 with 600 bucks.”
KYC optional
The CFTC continues, with the ever-more loose-lipped Lim allegedly stating in January 2019 that “Cz doesn’t wanna do us kyc on .com.”
2 BTC limit and US citizens
Regarding the implementation of a 2 bitcoin trading limit for non-verified customers, in 2019, Lim apparently told Zhao that “a huge number” of Binance’s “TIER 1 [meaning customers trading via the two BTC-no KYC loophole] could be U.S. citizens in reality. They have to get smarter and VPN through non-U.S. IP.”
We’re doing things that are not in line with the US
The complaint states that during a management meeting in June of 2019 Zhao stated that “[T]here are a bunch of laws in the US that prevent Americans from having any kind of transaction with any terrorist, and then in order to achieve that, if you serve US or US sanctioned countries there are about 28 sanctioned countries in the US you would need to submit all relevant documents for review [but that is
not] very suitable for our company structure to do so. So, we don’t want to do that and it is very simple if you don’t want to do that: you can’t have American users. Honestly it is not reasonable for the US to do this . . . . [U.S. regulators] can’t make a special case for us. We are already doing a lot of things that are obviously not in line with the United States.”
VPNs are not very subtle
The CFTC states that in March 2019, Lim said: “We are actually pretty explicit about [encouraged VPN use] already – even got a fking guide. Hence CZ is ok with blocking even usa.”
Creative onboarding of US users
The ever-obliging Lim allegedly told an employee that “On the surface we cannot be seen to have US users but in reality we should get them through other creative means.”
Who’s in Chicago?
The complaint notes that a VIP team member contacted Zhao regarding a “Chicago-headquartered trading firm.”
VIP team member: Hi CZ . . . I went through list of affected API clients, it includes a number of large strategic accounts including [a Chicago-headquartered trading firm] who is currently is a top 5 client and 12% of our volume
Zhao: Give them a heads up to ensure they don’t connect from a us Ip. Don’t leave anything in writing. They have non us entities. Let’s also make sure we don’t hit the biggest market makers with that email first. Do you have signal?”
Despite Binance’s long-standing protestations of compliance, the CFTC appears to have significant and detailed information to support its complaint. And that can only be bad news for Binance.
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Source: https://blockworks.co/news/binance-cftc-damning-quotes