The Northern District of Illinois has recently seen a lawsuit brought against Binance by the Commodity Futures Trading Commission, alleging a lack of registration and potential violations of US commodity market laws.
The CFTC has specifically targeted Binance’s CEO, Changpeng Zhao, as well as the heads of three other organizations affiliated with the platform, including former Chief Compliance Officer Samuel Lim.
The commission has accused these individuals of aiding and abetting the breach of US regulations governing commodity markets, stating that they purposefully created an opaque corporate structure and ignored the provisions of the Commodity Exchange Laws applicable to Binance.
The CFTC claims that Binance knowingly violated their rules and worked actively to avoid compliance, with their efforts to comply with regulations being mere fiction.
The commission believes that Binance has been offering and executing commodity derivatives trades for US citizens since July 2019 without registering activities as an intermediary for derivatives in the CFTC, as required by US law.
Additionally, the customer verification and identification process employed by Binance has been deemed ineffective, and management allegedly instructed US employees and customers on how to circumvent controls in order to maximize profits.
Reports have also emerged claiming that Binance employees and volunteers may have provided confidential advice to users from countries where the exchange is not authorized to operate, effectively bypassing the “know your customer” procedure and allowing users to remain anonymous.
The CFTC has emphasized that it will not tolerate willful evasion of US laws and hopes that this lawsuit serves as a warning to digital asset exchanges around the world.