The US Commodity Futures and Trading Commission has charged Binance and two of its top executives with "wilful evasion of US law" and is seeking disgorgement, civil monetary penalties and permanent trading and registration bans against the digital asset firm.
The watchdog is charging CEO Changpeng Zhao and three entities that operate the Binance platform with numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations. The complaint also charges Samuel Lim, Binance’s former chief compliance officer, with aiding and abetting.
The complaint alleges that over the past four year, Binance has failed in it duty to perform identity verification checks and implement compliance contriols to prevent money laundering over the platform.
The filing suggests that Binance also sought to deliberately hide its lax compliance from business partners, pointing to a 2020 audit reqest from Paxos. Quoting Lim, the charge sheet alleges that Binance purposely engaged a compliance auditor that would "just do a half-assed individual sub-audit on geo (fencing)" to "buy us more time".
Earlier this month, Binance had to suspend all dollar bank transfers and amidst growing regulatory scrutiny of the exchange in the wake of the FTX collapse.
The CFTC charges that even after suspending trading, the firm instructed its US VIP customers on the best methods for evading Binance’s compliance controls.
In addition, the complaint charges Binance with acting as a designated contract market or swap execution facility based on its role in facilitating derivatives transactions without registering with the CFTC, as required.
CFTC Chairman Rostin Behnam, comments: “For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law."
The US Justice Department is also investigating the firm over suspected money laundering and sanctions violations while the SEC is eying its BUSD stablecoin.