Binance, the world's largest cryptocurrency exchange, and its CEO Changpeng Zhao have been sued by the U.S. Commodity Futures Trading Commission (CFTC). This is seen as the first major crackdown by U.S. regulators on Binance.
On the 27th (local time), according to Bloomberg and other sources, the CFTC filed a complaint in the U.S. District Court in Chicago, alleging that Binance and CEO Zhao violated regulations related to derivatives and other products. Under federal law, institutions must register if they facilitate commodity trading for U.S. persons, but Binance reportedly failed to comply. Samuel Lim, Binance’s former Chief Compliance Officer, was also included in the lawsuit for allegedly aiding and abetting these violations.
In the complaint, the CFTC stated, "Changpeng Zhao and others ignored federal laws applicable to Binance as it developed its U.S. customer base" and added, "They did so because it was profitable for them." Accordingly, the CFTC requested the court to impose disgorgement of Binance’s illegal gains, civil penalties, and permanent bans on trading and registration.
The CFTC had previously detected signs that Binance was facilitating derivatives trading such as Bitcoin futures and options for U.S. investors and had been conducting related investigations. Founded in China and with offices in Singapore and elsewhere, Binance has claimed it has no U.S. base and is not subject to U.S. jurisdiction.
CFTC Chairman Rostin Behnam said, "For years, Binance has known it was violating CFTC regulations and actively worked to maintain cash flows and avoid compliance," emphasizing, "(This lawsuit) should serve as a warning that digital asset platforms and individuals who deliberately ignore and evade U.S. laws will never be tolerated."
According to the complaint, Binance, CEO Zhao, and Samuel Lim violated eight core provisions of the Commodity Exchange Act (CEA), including those aimed at preventing money laundering and terrorist financing.
The complaint also alleges that CEO Zhao and others actively sought to attract major profitable VIP clients, including U.S. institutional investors, and deliberately concealed the locations of exchange subsidiaries to evade regulatory oversight. Furthermore, the CFTC pointed out that Binance provided VIP clients with privileged information about regulatory investigations and asset freezes. The complaint includes a statement that Binance told its VIP team, "Do not directly tell customers to flee. If they are big or smart customers, they will get the hint."
Local media predict that the CFTC’s lawsuit could cause serious disruption to Binance’s operations. It is viewed as the first coordinated regulatory strike against Binance. Meanwhile, federal prosecutors and the Internal Revenue Service are also investigating Binance’s compliance with anti-money laundering obligations. The Securities and Exchange Commission is reportedly examining whether Binance supported unregistered securities trading. Bloomberg described this as "the most notable U.S. action aimed at cracking down on Binance."
In response to the CFTC lawsuit, Binance stated, "We have made significant investments over the past two years to prevent U.S. persons from using our platform and have spent an additional $80 million (approximately 104 billion KRW) supporting compliance programs." Shortly after the news broke, CEO Zhao posted the number '4' on Twitter, which major foreign media interpreted as a message to "ignore fake news and attacks."
Following the news of Binance’s lawsuit, Bitcoin, the leading cryptocurrency, briefly dropped to around $26,500. As of the afternoon, it was trading at approximately $27,045, down 2.88% from the previous close. Ethereum was trading at around $1,714, down 2.99%.
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