Securities and Exchange Commission has had its eye on Binance for some time: the regulator in 2021 asked the company for a list of information from its U.S. Then, in 2021, it took enforcement action against the exchange, ordering it to shutter its services. Malaysia crackdownīack in 2020, the Malaysia Securities Commission said that Binance was breaking the law by operating in the country-adding the crypto exchange to a blacklist, and advising investors not to use the platform. Representatives for the Department of Justice did not immediately respond to Decrypt ’s requests for comment. Reuters reported that the exchange’s defense attorneys met with DOJ officials and discussed potential plea deals.īinance argued that a criminal prosecution would have negative effects on a crypto market already crushed by the collapse of blockchain project Terra and mega exchange FTX’s bankruptcy last year, according to Reuters. In December, news dropped that Justice Department prosecutors were weighing up whether to aggressively go after the exchange or take time to review more evidence. The investigation also involves the IRS, and is focused on both Binance’s compliance with anti-money laundering laws and sanctions as well as potential tax offenses, according to a May 2021 report from Bloomberg. Officials from the Department of Justice have been investigating Binance in 2018, according to Reuters. Zhao responded to the CFTC lawsuit on Twitter by suggesting he thinks the 74-page complaint is merely an attempt at spreading “FUD” (fear, uncertainty, and doubt.)ĪD Long-running Department of Justice and IRS cases It’s a pretty serious case-and if the regulator’s penalties stick, legal experts say it could significantly impact the company’s business in the U.S., or even globally, as the CFTC not only wants to hit the defendants mentioned in the lawsuit with fines, but also ban them from trading altogether. In its lawsuit this week, the regulator claims that the exchange’s 300 house accounts are exempt from its “a relatively new ‘insider trading’ policy.” By September 2021, that investigation had been expanded to include allegations of insider trading. markets in early 2021, according to a report from Bloomberg at the time. The CFTC first began investigating Binance over allegedly unlawful trading practices in U.S. The CFTC claims Zhao used his own companies to engage in proprietary trading activity on Binance via 300 “house accounts” but did not disclose this activity. clients dodge regulators-and even traded against its own customers. The lawsuit further claims that Binance knowingly evaded or helped U.S. Its anti-money laundering (AML) and know-your-customer (KYC) controls were not good enough, the CFTC also alleges. The CFTC lawsuit targets not just Binance but also CEO Changpeng Zhao and ex-chief compliance officer Samuel Lim.Īccording to the CFTC, Binance has not taken compliance seriously enough: the company allegedly committed multiple trading derivatives violations, including not being properly registered to offer derivatives to American clients, and it didn’t supervise activity on its exchange sufficiently. “Binance has taken a calculated, phased approach to increase its United States presence despite publicly stating its purported intent to ‘block’ or ‘restrict’ customers located in the United States from accessing its platform,” the Commission stated. and “chose to ignore” rules designed to block Americans from using the service and trading unregistered crypto derivatives products. The lawsuit claims that Binance, its CEO Changpeng Zhao, and other employees at the exchange solicited customers in the U.S.

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