Crypto Council Comments on Binance Enforcement Action: CFTC Goes Straight for the Knockout

This past week, the Commodities Futures Trading Commission filed an enforcement action against Binance and its founder Changpeng Zhao (CZ). The lawsuit comes as no surprise to industry followers as Binance is the largest crypto exchange globally and represents a fat target for regulators. The allegations against Binance fall along the lines of allowing US-based individuals to trade on the exchange – encouraged by management while flouting the rules, as well as claims of lax AML/CFT protocols. The potential outcome may include Binance’s exit from the US market as well as any other penalties assessed by the CFTC.

CI received a comment from Sheila Warren, CEO of the Crypto Council for Innovation, stating the CFTF is gunning for the top dog in the digital asset sector.

“We can all agree that blatantly flouting the laws of a country is not acceptable. In situations where this is alleged, the CFTC doesn’t waste its time on jabs – it goes straight for the knockout,” said Warren.  “In the case of Binance, they are going after an organization with a checkered past, and many have been waiting for the US government to act. Last year, [it was reported] that the US Justice Department was investigating the company for suspected sanctions violations and money laundering. It’s safe to assume that this action from the CFTC was a long time in the making.”

Warren added that the action against Binance alleges deliberate fraud and evasion of regulatory requirements and stands in stark contrast to the Wells notice recently issued by the SEC targeting Coinbase.

“In the case against Binance, text messages discuss sidestepping regulation, hiding internal documents, and defrauding the US. Coinbase, by contrast, has a fossil record a mile deep of attempts to engage with the SEC and come into the regulatory perimeter. The interplay between the CFTC and SEC is critically important to note here. In this action, the CFTC is asserting that both bitcoin and ethereum are commodities. This is a powerful shot across the bow of the SEC that could have significant implications for the industry and for which agency has ultimate authority.

Warren states that the outcome will obviously be determined by the company’s response, but the most obvious result is some sort of settlement by Binance.

“This action will hopefully mean the end of people coming into the crypto space trying to take advantage of the lack of regulatory clarity in the United States,” said Warren.

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