By Mark Ackman
CFTC Impleads Binance and CEO
Over allegations of selling unregistered securities Binance and exchange’s CEO, Changpeng Zhao has been impleaded in a lawsuit filed in the US.
The suit reportedly has been filed by a top US regulator namely Commodity Futures Trading Commission (CFTC).
The lawsuit has been brought by CFTC on Monday in which Binance, its CEO, and other key personnel have all been impleaded as defendants.
CFTC’s Specific Allegations against Zhao and Binance
CFTC’s lawsuit was evidently been filed mainly against Binance as well as Binance’s founder and existing CEO, Zhao.
The allegations raised by CFTC involve buying, selling, and exchanging non-CFTC registered commodities in the US market to US consumers.
CFTC has further accused Zhao and Binance that they had deliberately violated the relevant laws as laid down in existing commodity laws.
CFTC is asking the Court to declare Binance was engaged with crypto derivative products which, under law, were required to be registered.
It has been assumed by CFTC that Binance’s failure to register shows negligence on part of Binance. The regulator has further accused Binance of neglecting its duty which it owed to the regulator i.e. compliance with the law.
It was hence submitted in the lawsuit by CFTC that Binance has been found acting in contravention of the US Federal Law.
District Court of Illinois Is Due To Hear the Lawsuit
As per several media reports, it is confirmed that CFTC filed the respective suit in the District Court of Illinois.
In the suit, CFTC has claimed that Binance has been carrying out its business in the US territory for a very long time. Traders in the US have been offered several crypto derivatives which fall within the category of ‘commodities’.
Since the products were ‘commodities’ and not ‘securities’, hence Binance should have obtained CFTC’s registration. In the case of securities, instead of going to CFTC, Binance should have gone to Securities & Exchange Commission.
CFTC’s points raised in the lawsuit suggest without an iota of doubt that Bitcoin, Ethereum, etc. are all commodities.
Further allegations of CFTC suggest that Binance has deputed and housed its officers in the US. It is the case of CFTC that Binance cannot manage officers in the US without first establishing its physical presence there.
It has been claimed by CFTC that VPN servers have been used by Binance officers in the US for concealing their exact locations. According to CFTC, such officers are somewhere in the US but have concealed their physical locations.
Binance Specific Allegations
CFTC has raised many allegations against Zhao and Binance, however, Binance-specific accusations are in addition to other allegations.
One allegation is that Binance was offering commodity options trading through an off-hand exchange. It is the claim of CFTC that rendering such services is in direct violation of laws pertaining to ‘futures transactions’.
CFTC claimed that dealing with future trading required Binance to get itself registered as an ‘exchange for future merchants’.
Thirdly, CFTC accused Binance of carrying out business activities without following the laws and regulations.
Similarly, the platform has been accused of non-implementing global policies in letter and spirit such as Anti-Money Laundering and KYC.
CFTC has also said in the suit that Binance managed its operations and affairs poorly and never took compliance seriously.
Impact of News Globally
The news of CFTC suing Zhao and Binance spread like a wildfire in the global media. As a result thereof, the first one to incur the damage was none but Bitcoin from the rebounding crypto industry.
Righter after the surfacing of the news, Bitcoin gains were cut down by at least 3% which came in less than 10 minutes time.
The value of Bitcoin was also reduced below $27,000 but luckily the downward trend lived very shortly. By the time of this piece, Bitcoin has already rebounded back and recovered the lost gains.
However, Binance is definitely in big trouble as it cannot afford to get into disputes directly with the regulators.
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