The CFTC sued Binance for filing Collation: Violation of U.S. Exchange Law, and did not recognize Binance's compliance

Crypto trading platform Binance and its CEO, CZ, have been sued by the US Commodity Futures Trading Commission (CFTC) for alleged violations of trading and derivatives rules, Bloomberg reported on the evening of March 27 (Beijing time). Impose a permanent transaction and registration ban on Binance and its related entities, and prohibit the transaction, control, advice, sharing, and other activities involving commodity interests and digital currency goods.

In a lawsuit filed Monday in federal court in Chicago, the CFTC said Binance and its CEO, CZ, violated U.S. Commodity Trading Commission rules, including the Commodity Exchange Act, without any registered authority, Solicited and accepted orders from U.S. customers for commodity futures trading, options, swaps and leveraged retail commodity trading that were not completed on the trading platform without any compliance registration.

The complaint alleges that Binance, under the direction of CZ, inadvertently circumvented legal oversight by assisting the chief compliance officer, Samuel Lim, to generate revenue from customers in the United States, prioritizing commercial success over compliance. Despite promises to limit access to its platform for U.S. customers, Binance relies on local U.S. personnel and suppliers, and actively cultivates U.S. -based VIP customers while hiding identities and locations to avoid regulation. Binance allegedly assisted U.S. users in circumventing controls by, for example, instructing them to use technology to disguise their location, continuing to allow transactions when controls were prohibited, and instructing VIP customers to form shell companies to evade compliance controls. As a result, the CFTC seeks civil monetary penalties and remedial collateral relief measures, including, but not limited to, trading and registration bans, forfeiture, and pre - and post-judgment interest.

In its complaint, the CFTC provides a summary version, which BlockBeats organizes as follows:

Binance operates the world's largest centralised platform for trading digital assets, appearing inan opaque network of corporate entities, all of which are ultimately controlled by CZ and form a common enterprise called "Binance" or "Binance ecosystem". The majority of the volume and revenue Binance reports comes from its extensive solicitation and access to clients located in the United States, including the region, who conduct many different types of physical and derivative transactions in digital assets involving interstate commerce on Binance's platform.

Since July 2019 to date (the "relevant Period"), under the direction and control of CZ and with the intentional and material assistance of Lim, Binance has solicited and accepted orders, accepted property as security, and operated a premises, Futures, options, swaps, and leveraged retail commodity trading services used to provide digital asset commodities including Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) to individuals in the United States.

Since launching its platform in 2017, Binance has taken a calculated, phased approach to increase its presence in the US, despite its stated intention to "block" or "restrict" access to its platform for customers based in the US. Binance was initially strategically positioned to attract retail customers. In later stages, Binance became increasingly dependent on personnel and suppliers located in the United States and actively cultivated profitable and commercially important "VIP" customers located in the United States, including institutional customers. At the same time, Binance and Mr Lim, CZ and Peacetime's chief compliance officer, knew that Binance's soliciting of clients based in the US would subject it to registration and regulatory requirements under US law. However, Binance, CZ, Lim all chose to ignore these requirements and undermine Binance's ineffective compliance program by taking steps to help customers circumvent Binance's access controls.

The defendants ignored applicable federal law while promoting Binance's U.S. customer base because it was profitable for them. For example, according to Binance's August 2020 filing, the platform generated $63 million in revenue from derivatives trading, and about 16 percent of the accounts were held by clients Binance identified as being located in the United States. By May 2021, Binance's monthly revenue from derivatives trading had grown to $1.14 billion. Binance chose to prioritize commercial success over the decision to comply with US law, and as Lim summed up CZ's position, "it was a business decision".

Binance deliberately conceals the identity and location of the entity running the trading platform. For example, Binance's customer-facing "terms of use" claim to be a contract between the customer and something called "Binance operators," a term that has no specific meaning. Although Binance had offices ina number of locations at various times during the relevant period, including Singapore, Malta, Dubai and Tokyo, Binance deliberately does not disclose the location of its administrative offices. Instead, CZ says Binance's headquarters are located where he is at all times, reflecting a deliberate strategy to avoid regulation. CZ explained this strategy at an internal meeting in June 2019, saying Binance operates through various entities set up in multiple jurisdictions to "land nowhere." This is the main reason ".com doesn't land anywhere "in order to" keep the country clean (without breaking the law) ".

CZ, Lim and other members of Binance's senior management failed to properly monitor Binance's activities and, in fact, actively facilitated violations of U.S. law, including assisting and directing customers located in the United States to circumvent the compliance controls Binance purported to implement to prevent and detect violations of U.S. law. Binance and its officers, employees and agents instruct U.S. customers to use technology to cover their locations; Allowing customers who fail to submit proof of identity and location to continue trading on the platform after declaring that such behavior is prohibited; And directed VIP clients, whose ultimate beneficial owners and key employees controlling trading decisions, trading algorithms and other assets are based in the United States, to open Binance accounts in the name of the newly formed shell company in order to circumvent Binance's compliance controls.

Although Binance solicits and relies on customers located in the United States to generate revenue and provide liquidity for its various markets, Binance has never registered with the Commodity Futures Trading Commission (CFTC) in any way and disregards federal laws that are essential to the integrity and vitality of the financial markets of the United States, Includes laws requiring controls designed to prevent and detect money laundering and terrorist funds, in violation of the Commodities Exchange Act (the "Act" or the "CEA") (7 U.S.C. §§ 1-26) and the CFTC Regulations (the "Regulations") (17 C.F.R. pts. 1-190 (2022)).

During the relevant period, through the operation of the Binance Platform, Defendant Binance, with the assistance of Lim, and CZ violated core provisions of the CEA and Regulations, including: i. Offering, entering, confirming, or otherwise processing over-the-counter commodity futures in violation of CEA Section 4(a) or selectively violating CEA Section 4(b) and Regulation 48.3, 17 C.F.R. § 48.3 (2022); ii. offering, entering, confirming, exercising, or trading over-the-counter commodity options in violation of CEA section 4c(b) and Regulation 32.2, 17 C.F.R. § 32.2 (2022); iii. To solicit and accept orders for commodity futures, options, swaps and retail commodity transactions, or to act as counterparties to agreements, contracts or transactions; In connection with these activities, the acceptance of money, securities, or property (or in lieu of credit) to secure or guarantee transactions on the Binance Platform violates CEA Section 4d and 7 U.S.C. § 6d; iv. Operating a swap transaction or processing facility without being registered as a swap execution facility (SEF) or designated as a contract Market (DCM), in violation of CEA Section 5h(a)(1) and Regulation 37.3(a)(1), 17 C.F.R. § 37.3(a)(1) (2022); v. Failure to diligently supervise Binance's activities in relation to the Commission's registration requirements, in violation of Regulation 166.3, 17 C.F.R. § 166.3 (2022); vi. Failure to implement effective customer information procedures or otherwise comply with applicable provisions of the Bank Secrecy Act, in violation of Regulation 42.2, 17 C.F.R. § 42.2 (2022); And vii. Knowingly conduct activities outside the United States, including entering into agreements, contracts, and transactions, and construct entities that willfully circumvent or attempt to circumvent any regulations of the CEA promulgated in Appendix A of the Wall Street Transparency and Accountability Act of 2010, in violation of Regulation 1.6, 17 C.F.R. § 1.6 (2022).

Unless restrained and prohibited by this Court, defendants are likely to continue to engage in the conduct described in this suit and similar acts and practices.

Accordingly, the CFTC brings this action pursuant to CEA Section 6c, 7 U.S.C. § 13a-l, to prohibit Defendants' unlawful acts and practices and to compel them to comply with the Act. In addition, the CFTC seeks civil monetary penalties and remedial collateral relief measures, including, but not limited to, trading and registration bans, forfeiture, pre - and post-judgment interest, and such other relief measures as the court deems necessary and appropriate.

欢迎加入律动 BlockBeats 官方社群：

Telegram 订阅群：https://t.me/theblockbeats

Telegram 交流群：https://t.me/BlockBeats_App

Twitter 官方账号：https://twitter.com/BlockBeatsAsia