Binance CEO CZ has said that CFTC’s civil complaint against the world’s largest cryptocurrency exchange is unexpected and disappointing, and they do not agree with many of the allegations.
In a company blog post on early Tuesday, March 28th, Changpeng Zhao, better known as CZ, presented a detailed response to the US Commodity Futures Trading Commission (CFTC) complaint seeking a permanent trading registration ban on Binance.
Today the CFTC charged Binance and its founder, Changpeng Zhao, with willful evasion of federal law and operating an illegal digital asset derivatives exchange. Learn more: https://t.co/DdczFgvW6A
— CFTC (@CFTC) March 27, 2023
CFTC Sues CZ and Binance
According to a Monday press release, the CFTC filed a complaint in the US District Court for the Northern District of Illinois, charging Binance group and its CEO Changpeng Zhao with “willful evasion of federal law and operating an illegal digital asset derivatives exchange.” The complaint also sues the chief compliant officer (CCO) Samuel Lim “with aiding and abetting Binance’s violations.”
CFTC alleges that Binance, with CZ as the boss and Samuel Lim at compliance controls, willfully violated the applicable provisions of the Commodity Exchange Act (CEA) and CFTC regulations while “engaging in a calculated strategy of regulatory arbitrage to their commercial benefit.”
According to Gretchen Lowe, CFTC’s Enforcement Division Principal Deputy Director and Chief Counsel, Binance’s compliance efforts have been a sham as, for much of the time, the exchange did not ask customers to provide any ID verification. At CEO’s order, Binance instructed “creative means” to assist US customers in circumventing Binance’s compliance controls.
Furthermore, the commodities regulator claims that Binance operated as a derivative exchange without required registration with the CFTC. According to the press release:
“The agency seeks disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations, as charged.”
In his response, the crypto mogul said:
“The CFTC filed an unexpected and disappointing civil complaint, despite our working cooperatively with the CFTC for over two years.
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.”
My Response to the CFTC Complaint | Binance Blog https://t.co/TadyotM7HN
— CZ 🔶 Binance (@cz_binance) March 27, 2023
In his clarification regarding compliance, he said that his exchange is the first non-US organization that implements a best-in-class mandatory KYC and AML technology. It employs more than 750 members of its compliance team.
He noted that, to date, his crypto empire had responded to more than 55,000 law enforcement inquiries and assisted authorities in “freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far.”
Regarding trading, CZ said the exchange didn’t trade itself for profits. He stated:
“Binance “trades” in a number of situations. Our revenues are in crypto. We do need to convert them from time-to-time to cover expenses in fiat or other cryptocurrencies. We have affiliates that provide liquidity for less liquid pairs. These affiliates are monitored specifically not to have large profits.”
CZ has two accounts at Binance but “never participated in Binance Launchpad, Earn, Margin, or Futures.” Similarly, there is a 90 days “no-day-trading” rule for the exchange’s employees. They are prohibited from trading in futures and selling or buying coins from Binance Launchpad.