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Ex-Binance chief compliance officer accused of helping CFTC rule violations

The Commodities Futures Trading Commission (CFTC) sued Binance and its founder with illegally running an exchange for digital assets.

Monday's notice also included charges against former Binance Chief Compliance Officer Samuel Lim for alleged violations of the Commodities Exchange Act (CEA) and CFTC rules. The complaint named the entities Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Ltd, as well as the company's creator, Changpeng Zhao.

The complaint, which was filed in the U.S. District Court for the Northern District of Illinois, cited several infractions at Binance, including:

  • Failing to register as a futures commission merchant, designated contract market, or swap execution facility;

  • Failing to diligently supervise whether its trading activities violated the CEA and CFTC regulations;

  • Failing to implement a customer identification program that included know your customer (KYC) and anti-money laundering procedures; and

  • Willfully evading the CEA and CFTC rules.

Lim is charged with wilfully circumventing the CEA's standards and willfully aiding and abetting Binance's alleged offences, including urging clients to conceal their identities and locations via virtual private networks (VPNs) or shell firms.

The specifics: Binance is the largest cryptocurrency exchange in the world. According to the CFTC, from July 2019 to the present, it illegally marketed and executed commodity derivatives transactions to and for U.S. individuals. In August of 2020, around 16 percent of the exchange's accounts were held by consumers in the United States.

The complaint states that since 2017, Binance actively recruited and onboarded new U.S.-based consumers notwithstanding its assertion that its compliance policy successfully prevented them from utilising the platform.

“Binance’s decision to prioritize commercial success over compliance with U.S. law has been, as Lim paraphrased Zhao’s position on the matter, a ‘(business) decision,’” the complaint said.

Binance response: In an emailed statement, a Binance spokesperson called the CFTC’s action “unexpected and disappointing, as we have been working collaboratively with the CFTC for more than two years.”

“We have made significant investments over the past two years to ensure we do not have U.S. users active on our platform,” the spokesperson said. Binance has 750 core and supporting compliance employees, ensures mandatory KYC for customers worldwide, and blocks all U.S.-based customers from accessing the platform, the spokesperson said.


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