Binance CFTC suit shows that ‘regulators will keep regulating and regulate more’

There might be more lawsuits coming

Another bomb has fallen on the crypto space — and the impact could be far-reaching

On Monday, the U.S. Commodity Futures and Trading Commission announced it was suing Binance, the world’s largest crypto exchange by volume; its CEO, Changpeng Zhao; and chief compliance officer Samuel Lim. The company, Zhao and Lim are being sued for allegedly breaking trading and derivatives rules.

“Crypto is under attack,” Yankun Guo, partner at Chicago-based law firm Ice Miller, told TechCrunch+. “The past six months has seen a wave of complaints and enforcement actions against blue-chip names including Coinbase, Kraken and KuCoin, and it was only a matter of time until Binance had their turn.”

Binance had about $11 billion in trading volume in the past 24 hours and has over 90 million customers globally, according to CoinMarketCap data. It launched in June 2017, and within 180 days became the largest crypto exchange in the world.

The exchange has never registered with the CFTC in any capacity and has “disregarded federal laws” for U.S. financial markets, including laws that implement controls to prevent and detect money laundering and terrorism financing, among other aspects, the filing said.

TechCrunch+ reached out to CFTC for comment but did not hear back by the time of publication.

A Binance spokesperson said the filing was “unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years.” They added that they intend to continue to collaborate with regulators in the U.S. and around the world. “The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.”

Binance has spent $80 million on external partners like know-your-customer vendors, transaction monitoring, market surveillance and investigative tools to support its compliance programs, the spokesperson added.

The ultimate impact on Binance could send shockwaves through the global digital asset market, Jason Allegrante, chief legal and compliance officer at Fireblocks, said.

The lawsuit is also interesting because two executives, Zhao and Lim, were named, Guo noted. “This is a major shift that shows regulators are not only going after the company but also executives.”