The tree wanted to be quiet but the wind never stopped, the sword of Dakmos hanging over CZ-Changpeng Zhao finally fell, everything came suddenly but it was an inevitable result:
“On March 27, US Eastern Time, the US Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and its founder and CEO Changpeng Zhao, accusing it of providing illegal derivatives transactions in order to seek high-speed growth and allegedly concealing violations.”
After the news was released, the decline of cryptocurrencies accelerated across the board. Bitcoin once fell below $26,700 in early trading in the U.S. stock market, an intraday low since March 18. Cryptocurrency-related U.S. stocks fell sharply, and Coinbase once exceeded 10%.
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Demolition content
According to the lawsuit documents published by the CFTC, Binance is involved in providing trading services to US investors and its compliance issues. It mainly makes four specific allegations:
1. Binance Offers Trading Services to U.S. Investors Not Registered with CFTC
The CFTC noted that Binance relies on U.S.-based customers to generate revenue and provide liquidity in its various markets, but Binance has never registered with the CFTC in any form and disregarded federal regulations that are critical to the company’s integrity and viability. US financial markets. Laws, including laws requiring the implementation of controls designed to prevent and detect money laundering and terrorist financing.
Interestingly, by splitting the international business and Binance.US, in the "impression" of the majority of investors, Binance does not seem to include US users. But the CFTC doesn't think so.
The CFTC noted that in October 2020, CZ directed Binance personnel to replace “United States” with “UNKWN” in certain data fields in its internal database. Therefore, in Binance’s monthly revenue report for October 2020, about 2.83 million “unknown” users should actually be US users.
It can be concluded that customers located in the United States have provided Binance with significant revenue for certain time periods in the past.
2. Binance’s trading platform allows U.S. investors to trade leveraged and futures
The CFTC believes that under the direction and control of CZ, and with the deliberate and substantial assistance of Lim, Binance has solicited and accepted multiple types of orders from U.S. persons involving cross-border digital asset spot and commodity derivative transactions, including Futures, options, swaps and leveraged retail commodity trading. These digital assets include Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). Therefore, it can be concluded that Binance’s trading platform allows leveraged trading and futures trading for US investors.
3. The CFTC believes that Binance violated the regulations of the US Commodity Futures Trading Commission, failed to make necessary risk disclosures to customers, and failed to meet other required requirements
Once Binance settles down to provide trading services for US customers, it will be difficult to avoid regulation. The CFTC accused Binance of violating U.S. Commodity Futures Trading Commission (CFTC) regulations by failing to issue required risk disclosures to customers and failing to meet other requirements of the regulations. Specifically, Binance failed to comply with the U.S. Commodity Futures Trading Commission’s Anti-Money Laundering and Counter-Terrorist Financing regulations by failing to register as a derivatives trader.
4. The CFTC wants the court to order Binance to stop the violations and order Binance to pay fines
The CFTC wants the court to order Binance to cease its illegal conduct and to require Binance to pay civil monetary penalties and remedial ancillary relief measures, including but not limited to trading and registration injunctions, return of ill-gotten gains, and pre-judgment and post-judgment penalties. Judgment interest, and any other damages the court deems necessary and appropriate. other remedies.
The CFTC also asked the court to fine Binance under the Federal Civil Penalty Notice Improvement Act, adjusted for inflation, though the document did not mention a specific amount.
In fact, the encryption circle has been looking for direction in a vacuum environment of bank distrust and regulatory pressure throughout March. The bankruptcy of crypto-friendly banks has excluded crypto capital from the front row of claims and follow-up attention, while large crypto exchanges or executives Level personnel are generally questioned and worried.
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Binance/CZ Zhao’s Counterattack
After being sued by the CFTC, Zhao Changpeng tweeted on his personal social platform: 4 , which seems to be a response to the fourth clause of the 2023 focus target and proposal released at the beginning of the year: Ignore FUD, fake news, attacks, etc., namely Respond to incidents by ignoring FUD news, fake news, malicious attacks, and more.
In addition to the United States, Binance has been warned and even sued by regulators in the United Kingdom, Japan, Malaysia, Thailand, Singapore and other countries in recent years. As the helm of Binance, Zhao Changpeng has repeatedly stated in a similar tone: "We hope to be licensed everywhere and cooperate with regulators everywhere."
This time, faced with the CFTC's prosecution, which is slapped on the face and has corroborated evidence, the predecessors in the information media age are naturally aware that ambiguous remarks may bring about nuclear bomb damage similar to the FTX effect. Changpeng Zhao directly responded to the incident on his official website. Emphasized the legitimacy and transparency of the platform, the concept of actively seeking regulatory cooperation, and generously displayed his two accounts on the Binance platform: one for Binance cards and one for encrypted assets for private turnover
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https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282
The impact of the currency circle
As the world’s largest cryptocurrency exchange, Binance accounts for 70% of the total trading volume in the spot market. What kind of "torture" will the first exchange face in turn, refer to the siege of TIKTOK at the hearing in the United States.
Although Binance has repeatedly emphasized that its global service provider status is not a label of one country and one region, the founder’s household registration and central office, and the proportion of employees are all out of red, but who does its underlying foundation and early user groups serve? Today, political correctness is the premise in the US, and it is the death sickle that many supervisors and hearing leaders are passionate about.
The currency circle has always been a sensitive group, and any turmoil will be fearful, not to mention the lawsuit in black and white, Binance is not FTX but it is better than it. If the unfavorable situation happens, the panic flight of funds will be staged again. This has an impact on encryption No less than throwing in an excess nuclear bomb, future recovery will be long and painful.
On the one hand, Binance is likely to reach a settlement by paying a "high" fine, and any settlement will definitely include stopping any derivatives sales and further violations. On the other hand, tough supervision may cause Binance to divest its US business and ensure the security of the US in terms of capital flow and user information.
"Statement: According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any business and investment behavior. Readers are requested to strictly abide by the laws of the region Regulations, do not participate in any illegal financial behavior』
"Statement: According to the "Notice on Further Preventing and Dealing with the Risk of Hype in Virtual Currency Transactions" issued by the central bank and other departments, the content of this article is only for information sharing, and does not promote or endorse any business and investment behavior. Readers are requested to strictly abide by the laws of the region Regulations, do not participate in any illegal financial behavior』
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