US regulators on Monday accused Binance of operating illegally in the country.
The Foreign Exchange Commission (CFTC) has announced that it has filed a civil lawsuit against the world's largest cryptocurrency trading platform, against its founder and boss, Changpeng Zhao, and against its former director of regulatory compliance, Samuel Lim.
He accuses them of breaking the regulations that require operations with futures and derivatives on raw materials and other assets to be made through regulated markets.
“Don't put anything in writing,” Zhao said as he gave instructions on how to break the law using the Signal app, with automatically deleted messages.
The action filed in the Northern District Court of Illinois seeks refunds, fines, and vetoes and debarments to prevent further violations of securities and asset trading regulations.
It is a new step in the offensive against entities linked to the world of cryptocurrencies that tried to take advantage of legal loopholes, but that, in the opinion of supervisors, have ended up breaking the laws.
Binance came to consider the purchase of the bankrupt FTX and is one of the great preachers of crypto assets throughout the world.
Although Binance said it was staying out of the US market, it was untrue, according to the lawsuit, which claims that the platform has offered and executed derivatives transactions to US clients from July 2019 to the present.
“Under Zhao's direction, Binance has instructed its employees and clients to circumvent compliance controls in order to maximize corporate profits,” the CFTC says.
The complaint accuses Binance of failing, for much of that period, to require its clients to provide any information that would allow them to verify their identity before trading on the platform, despite a legal obligation to do so, and that did not apply basic compliance procedures designed to prevent and detect terrorist financing and money laundering.
The 74-page lawsuit further alleges that, even after Binance sought to restrict US clients from accessing its platform, it instructed its clients (particularly the most valuable US ones) on the best methods to circumvent security controls. regulatory compliance of the platform itself.
Among the numerous oversight failures detailed is the instruction given to its employees to communicate with US customers through the Signal app, which was set to automatically delete messages.
According to the lawsuit, Binance thus sought to erase evidence of its efforts to retain US-based clients.
They also communicated with WeChat and Telegram.
According to the lawsuit, Zhao is allegedly responsible for all major strategic decisions at Binance, including the conception of the secret plot to instruct US-based VIP clients to evade compliance checks and the deletion of messages. automatically.
“Tell them to make sure they aren't connecting from a US IP address. Don't leave anything in writing.
(…) Do you have Signal?”, says a message from Zhao included in the lawsuit.
The platform taught US clients how to log in via a virtual private network (VPN) to bypass controls based on Binance's IP address or how to create accounts through offshore shell companies
to
evade other controls.
The lawsuit accuses various companies of operating the centralized digital asset trading platform Binance through an intentionally opaque joint venture, led by Zhao as owner and CEO.
“Defendants allegedly chose to knowingly ignore applicable provisions of the CEA while engaging in a calculated strategy of regulatory arbitrage for their commercial benefit,” the CFTC asserts.
The president of the supervisory body, Rostin Behnam, has indicated through a statement: “For years, Binance knew that they were violating CFTC rules, actively working both to keep the money flowing and to avoid compliance.
This should be a warning to anyone in the world of digital assets that the CFTC will not tolerate willful evasion of US law."
“The defendants' alleged willful evasion of US law is at the heart of the Commission's complaint against Binance,” said Gretchen Lowe, Principal Deputy Director and Senior Counsel in the CFTC's Enforcement Division.
“The defendants’ own emails and chats reflect that Binance’s compliance efforts have been a sham and that it deliberately chose, time and time again, to put profits over compliance with the law.”
stricter surveillance
Following the lawsuit, Changpeng Zhao tweeted a 4, a reference to his pinned tweet listing his four rules for this year.
The fourth, which he now refers to, reads: “Ignore FUD [Fear, Uncertainty, and Doubt], Fake News, Attacks, etc.”
Binance has been in the crosshairs of US authorities for years.
Following the fall of FTX, supervisors are tightening vigilance.
Coinbase reached an agreement in January to pay a $50 million fine for lack of anti-money laundering controls and other deficiencies.
The Securities and Exchange Commission (the SEC) has imposed sanctions and opened files on numerous firms in the sector, as well as celebrities who covertly advertised crypto assets.
The last of the big ones to fall was Genesis, a cryptocurrency firm that the SEC had recently accused of irregular practices and that already froze the withdrawal of client funds last November.
In January he made good forecasts and declared bankruptcy.
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