The United States Commodity Futures Trading Commission (CFTC) sued cryptocurrency exchange Binance for violations of trading and derivatives laws. The lawsuit, filed on March 27, alleged that the global platform offered its derivatives trading services to US clients without applying for a derivatives license.
The lawsuit by the US commodity watchdog caught many by surprise, with market watchers and journalists saying it was a political move. Eleanor Terrett, a journalist for Fox News, tweeted that sources close to the CFTC suggest the commodities regulator decided to file a lawsuit to prove to the Securities and Exchange Commission (SEC) that it is a commodity issue and not a commodity issue. values.
than a security one. They also say “Vegas odds” have the @SECGov rushing out a similar lawsuit against @binance as a counter.
— Eleanor Terrett (@EleanorTerrett) March 27, 2023
The lawsuit accuses Binance of prioritizing trading success over regulatory compliance. It claims that Binance disregarded applicable federal laws while boosting Binance’s US customer base. The US regulator has charged Binance and its CEO, Changpeng “CZ” Zhao, with seven violations of the Commodity Exchange Act (CEA) and Controlled Foreign Company (CFC) rules. its acronym in English).
Aside from the regulatory violations, the lawsuit also specifically concerns Binance’s US trading arms Merit Peak and Binance.US. The CFTC alleged that Binance and its affiliated entities are a joint venture with a UBO and under the direct control of Changpeng Zhao.
In the lawsuit, the CFTC has demanded that Binance and Zhao be prohibited from engaging in any of the conduct described in this case, such as trading with registered entities, having interests in commodities, or directing any trading in digital assets. The CFTC also wants Binance to return trading profits, income, salaries, commissions, loans, and fees derived from US persons, and pay civil penalties for violations.
The CFTC’s lawsuit against Binance is a big problem for the cryptocurrency industry, given its general belief that the CFTC does not go after small, meritless cryptocurrency players. This was evident in the case of Bitfinex in 2018, in which the exchange settled with a hefty fine in 2021.
Adam Cochran, a cryptocurrency market watcher, reiterated a similar stance, saying the CFTC “doesn’t go after frequent small cases like the SEC,” adding that “it’s a different beast and its cases are often fatal.”
In his Twitter thread, Cochran commented that the first evidence gathered by the CFTC could prove fatal for Binance. He added that the exchange could fight the case in the United States or settle it out of court, but would in all likelihood be forced to cease operations in the United States.
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