A top US markets regulator, the Commodity Futures Trading Commission (CFTC), on Monday charged cryptocurrency giant Binance, as well as its founder and CEO Changpeng Zhao with operating what the regulator alleged were an "illegal" exchange and a "sham" compliance program.
The CFTC sued Binance, Zhao and its former top compliance executive with "willful evasion" of US law, "while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit."
Rostin Behnam, chairman of the CFTC, said the charges against Binance, the world's largest crypto exchange, were part of a campaign to "find and stop misconduct in the volatile and risky digital asset market."
Binance CEO is disappointed
"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," Zhao said in a statement.
Meanwhile, a spokesperson for Binance said the firm will continue to "collaborate" with regulators. Binance has made "significant investments" to ensure it does not have US users on its platform, the spokesperson said.
Ineffective compliance program
The CFTC is responsible for oversight of commodities and derivatives markets, including for Bitcoin. Firms such as brokers that facilitate US customers' trading of such products are required to register with the agency.
Its charge sheet accuses Binance of failing to uphold standards that are required of a company operating as a derivatives market and dealing with major US trading companies.
Since July 2019, "Binance's compliance program has been ineffective," the CFTC statement said. At Zhao's direction, Binance employees and customers were directed to skirt compliance controls "to maximize corporate profits," the regulator added.
Crypto industry under scrutiny
US media reports have said Binance is under investigation by US federal prosecutors, the Securities and Exchange Commission (SEC) as well as the Internal Revenue Service (IRS).
Regulators are increasingly keen for oversight of a sector which boomed during the coronavirus pandemic when many people were stuck at home and enticed by the big returns seen by trade in Bitcoin.
The global crypto market stands at more than $1 trillion (€924 billion) and has risen sharply in recent months, although it remains far below its 2021 peak of $3 trillion.
dh/wd (AFP, AP, Reuters)