US CFTC Chairman: Confident in Binance Lawsuit

Binance Lawsuit Explained

U.S. Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnham appeared on CNBC’s “Squawk Box” on the 28th to discuss the lawsuit against cryptocurrency exchange Binance.

Binance CEO Changpong Zhao (CZ) said the complaint contained inaccuracies, but Venham said he had evidence and was confident in the lawsuit. The issue, he said, is something the CFTC has been concerned about for years when it comes to the cryptocurrency industry.

connectionUS CFTC sues Binance and CZ for violating US law

Benham reiterated the lawsuit, alleging that Binance did not comply with U.S. law and provided unregistered derivatives trading services to U.S. investors. He said that Binance had clearly circumvented U.S. rules and determined that it needed to take aggressive and swift enforcement action.

He also referred to allegations that Binance had encouraged customers to hide their location using a VPN (virtual private network), saying, “Even if you don’t have a headquarters and hide your location, you can evade CFTC tracking. I can’t,” he says.

Anonymous Company Revealed

The CFTC has sued three companies involved in the operation of Binance itself, CZ, and former chief compliance officer Samuel Lim. In addition to providing trading services to U.S. users without business registration, they have pointed out multiple problems such as inadequate identity verification procedures. The CFTC also claimed that most of Binance’s reported volume and profits depended on U.S. users.

After filing the CFTC lawsuit, it turned out that “Trading Firm A” (hereinafter referred to as “Company A”), which was not specified in the complaint, was “Radix Trading” based in Chicago, USA. The company’s co-founder Benjamin Blander told The Wall Street Journal (WSJ).

In the complaint, Company A was introduced as an example of a market participant trading on Binance. It is a company that Binance used to circumvent compliance controls. At Company A, executives, including top management, work at the headquarters in Chicago. Employees were using a VPN to access Binance, the CFTC claimed.

Blander explained that he had been trading on Binance for several years through overseas affiliates and prime brokers with access to Binance itself. According to the WSJ, such cryptocurrency trading is common among U.S.-based trading firms, according to several industry executives.

What is Prime Broker

In general, brokerage services for institutional investors such as hedge funds. It provides financing, asset custody, settlement agency, risk management, and more.

Cryptocurrency Glossary