Crypto trading giant Binance is facing a lawsuit from US regulators, which seeks to ban the platform, after alleging that the company has been running operations in the country illegally.
The lawsuit was filed by the Commodity Futures Trading Commission (CFTC), who claimed that the firm operated its US business while failing to register properly with authorities.
The CFTC also accused Binance of breaking a number of US financial laws. This includes rules intended to thwart money laundering. In a statement to Arabian Business, Binance defended its practices, calling the lawsuit “unexpected and disappointing.”
Binance’s statement
“The complaint filed by the CFTC is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years. Nevertheless, we intend to continue to collaborate with regulators in the US and around the world. The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.
“We have made significant investments over the past two years to ensure we do not have US users active on our platform. During that period, we went from approximately 100 people in our compliance team to around 750 core and supporting compliance personnel today, including almost 80 personnel with prior law enforcement or regulatory agency experience and approximately 260 personnel with professional certificates in compliance.
“We have spent an additional $80,000,000 on external partners, including KYC vendors, transaction monitoring, market surveillance and investigative tools that support our compliance programs.
“Consistent with regulatory expectations globally, we have implemented a robust “three lines of defense” approach to risk and compliance, which includes, but is not limited, to:
- Ensuring mandatory KYC for all users worldwide
- Maintaining country blocks for anyone who is a resident of the US
- Blocking anyone who is identified as a US citizen regardless of where they live in the world
- Blocking for any devices using a US cellular provider
- Blocking log-ins from any US IP address
- Preventing deposits and withdrawals from US banks for credit cards”
Binance was founded in 2017 and is now the world’s largest centralised exchange for digital assets.
The company, which claims over 100 million users globally, is led by Chinese-Canadian billionaire Changpeng Zhao, who was also named in the lawsuit.
According to the CFTC, Binance has been active in the US since 2019, but did not properly register itself with the government. The CFTC also claimed that Binance did not comply with relevant US laws, and used an “intentionally opaque” global corporate structure in a bid to escape oversight.
During that time Binance reportedly did not not require its customers to provide any identity-verifying information before trading on the platform, the CFTC said, adding that Binance evaded the rules “to maximise corporate profits.”
The CFTC has now asked the US court for fines, permanent trading and registration bans and restitution.
“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning that the CFTC will not tolerate wilful avoidance of US law,” CFTC chairman Rostin Behnam said.
Behnam added that the government filed the case to protect American investors, and is also a warning to those working in the crypto industry.
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