The US Commodity Futures and Trading Commission (CFTC) sued Binance and its CEO, Changpeng Zhao (CZ), on March 27th for not being in line with regulatory measures. Here we go again.
Binance and CZ sued
CFTC filed a complaint against the largest crypto exchange in the world, Binance, and its founder, CZ. CTFC also filed a complaint against Binance’s former CCO, Samuel Lim, alleging that Binance actively tried to get US clients and worked around the exchange’s “ineffective compliance program.“
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The filing could change how the biggest crypto exchange works and could be the first step in a regulatory crackdown on Binance. In its filing, the CFTC asked the court to do more than introduce monetary penalties. It also asked that trading and account registration be banned.
The regulator said that Binance, CZ, and Lim broke eight important parts of the Commodity Exchange Act, including laws that require controls “designed to prevent and detect money laundering and terrorism financing.”
“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 to anyone in the digital asset world that the CFTC will not tolerate wilful avoidance of US law,” the filing stated.
Notable withdrawals due to fear
Binance experienced, once again, a lot of crypto outflows of the crypto exchange due to regulators’ attacks. According to Thanefield Capital, over $1.5 billion left the largest crypto exchanges in just 12 hours. This is just through stablecoins.
1/ Large on-chain movements prior to the Binance indictment
A few hours before the Binance CFTC Indictment, there were large stablecoin withdrawals across centralized exchanges, totaling almost $1.5B in just 12 hours
Notably, Binance itself saw an $850M outflow. pic.twitter.com/yLD7f1cgmB
— An Ape's Prologue (@apes_prologue) March 27, 2023
Binance alone suffered the largest outflows, totalling more than $850 million. Nevertheless, Binance holds around $63 billion worth of crypto in USDT, BTC, ETH, etc. That means Binance should be fine as it has the highest reserves out of all cryptocurrency exchanges.
CZ’s reaction to CFTC filing
Binance’s CEO responded to the CFTC filing very fast in a blog post that was posted on Binance’s website. The article described the civil complaint as “unexpected and disappointing.”
“Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint,” the blog explained.
CZ said that Binance still has one of the highest standards in KYC (know your customer) and AML (anti-money laundering) when it comes to compliance technology in the US. CZ said that he didn’t know of any other crypto firm that had systems that were better or more complete than Binance.
In terms of working with law enforcement and being open with them, CZ stated that the exchange will continue to “respect and work with” regulators around the world. Furthermore, it’s important to know that Binance has more than 750 people on its compliance teams right now.
“To date, we have handled 55,000+ LE requests, and assisted US LE freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far,” the blog stated.
CZ also explained that Binance never trades for profit or manipulates the market. CZ was accused of insider trading and manipulating, but he went on saying to have only two accounts.
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“Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time-to-time to pay for my personal expenses or for the Card,” the blog clarified.
CZ fought hard against the accusations, claiming Binance is doing its best to comply with the laws. While SEC and CFTC may cause Binance’s CEO a headache, that’s probably it.
It’s the largest crypto exchange in the world for a reason, and I think it will stay that way. In my opinion, Binance is not going anywhere. WhaleChart, a popular crypto account, notified that it all may already be over. We’ll see soon.
There is allegedly no CFTC lawsuit against Binance anymore.
— whalechart (@WhaleChart) March 28, 2023