The Securities and Exchange Commission has been scrutinizing whether the exchange has supported the trading of unregistered securities.īinance, which exploded onto the crypto scene in 2017 and almost immediately took on and surpassed larger rivals, saw its market share surge after last November’s collapse of FTX. The Internal Revenue Service, as well as federal prosecutors, have been examining Binance’s compliance with anti-money laundering obligations, Bloomberg News has reported. The regulator is one of several US bodies that have been investigating Binance’s activities. Read More: Binance Probed by CFTC Over Whether U.S. CFTC rules generally require platforms to register with the agency if they let Americans trade those products. Since at least 2021, the CFTC has been probing Binance over whether it failed to keep US residents from buying and selling crypto derivatives. At the same time, Binance makes frequent use of the encrypted messaging app Signal to communicate with US customers, at Zhao’s instruction, the agency said. The CFTC alleged that the company intentionally destroyed documents. customer base because it has been profitable for them to do so,” the CFTC said in its complaint. “Defendants have disregarded applicable federal laws while fostering Binance’s U.S. The CFTC also said Binance’s own documents for the month of August 2020 showed that the platform earned $63 million in fees from derivatives transactions, and that about 16% of its accounts were identified as being held by US customers. The complaint says that as of at least May 2022, the company had not filed a single suspicious activity report in the US.
It also didn’t establish necessary safeguards for determining the true identity of customers, the agency said. The CFTC also alleged that Binance failed to implement an effective anti-money laundering program. The agency said that Zhao, Lim, other senior managers failed to properly supervise Binance’s activities and took steps to violate US laws, including instructing American customers to use virtual private networks, or VPNs, to obscure their location and directing “VIP customers” with US ties - often institutional market participants - to open Binance accounts under the name of shell companies.Īttempts to reach Lim for comment were unsuccessful. In addition to suing Zhao and several Binance entities, the CFTC also alleged that Samuel Lim, Binance’s former chief compliance officer, broke its rules. However, cases from the regulator can result in hefty fines and other penalties against companies and individuals. The CFTC is a civil government agency, so it can’t bring criminal charges against firms or seek jail time for individuals. In a statement on the Binance Blog, Zhao said the CFTC’s 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.” He added that he strictly observes Binance’s policies, including those for anyone with private information such as details on listings.
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