The largest cryptocurrency trading platform in the world, Binance, is under investigation by US regulators who claim it has been operating unlawfully in the US.
The Commodities Futures Trading Commission (CFTC) sued the company, alleging that it developed American business while improperly registering with the authorities.
It claimed that Binance had broken various financial laws, including prohibitions on money laundering.
Binance defended its business methods.
To ensure that US users were not active on the network, it claimed to have made “substantial efforts,” including barring users who were identified as US citizens or residents or who had US cell numbers.
“Considering that we have been collaborating with the CFTC for more than two years, this filing is surprising and disheartening. But, we want to keep working with regulators in the US and other countries “stated the company.
The best course of action is to safeguard our users while working with regulators to create an effective regulatory framework.
With more than 100 million users worldwide, the firm, which was founded in 2017, is now the largest centralized exchange for digital assets in the world. It is run by millionaire Changpeng Zhao, a Canadian of Chinese descent who was also mentioned in the case.
The CFTC claimed that although Binance has been operating in the US since 2019, it had never officially registered with the government or met with any US laws, opting instead to avoid regulation by utilizing an “intentionally opaque” global corporate structure.
The CFTC claimed in the civil case it filed in federal court in Illinois that Binance, for a significant portion of that time, did not ask its users to furnish any identity-verifying information before trading on the site.
The company declared it was tightening its regulations in 2021. But, the CFTC also claimed that it provided guidance to US-based clients on how to get around those restrictions by using virtual private networks (VPNs) and shell firms.
According to the CFTC, the business circumvented the laws “to maximize corporate profits.”
It requested reparations, penalties, and long-term trading and registration restrictions from the US court.
The government brought the lawsuit to defend American investors, according to CFTC Chairman Rostin Behnam, and it should serve as a larger warning to individuals operating in the cryptocurrency industry.
“Binance deliberately worked to maintain the flow of funds while also avoiding compliance for years while being aware that they were breaking CFTC regulations. This should serve as notice that the CFTC will not put up with willful disregard for US law “said he.
About the time the lawsuit was revealed, Mr. Zhao tweeted a message that said “4” and appeared to be a reference to a previous post that advised readers to “ignore…. bogus news, assaults, etc.”
The cryptocurrency market has been seeing a dramatic decrease in price as well as greater regulatory scrutiny after several years of rapid expansion.
The business was forewarned by US officials last year that they intended to use current regulations to more strictly enforce against problems like conflicts of interest and a lack of transparency.
According to the CFTC, lawsuits against Bitfinex and Tether were among the more than 20% of cases it had pursued in the previous year that was related to the industry. It is also one of the US agencies that have accused Sam Bankman-Fried and FTX, formerly a key rival of Binance, of fraud.