cryptocurrency titan suffers another setback


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Binance, the cryptocurrency giant, is in the crosshairs of US regulators. Accused of violating United States financial regulations, the platform is defending itself tooth and nail.

The Commodity Futures and Trading Commission (CFTC), the federal agency responsible for regulating commodities exchanges in the United States, has just filed a lawsuit against Binance in federal court in Illinois. The lawsuit accuses the platform and its founder, Changpeng Zhao, of repeated violations the Warenbeurswet (CEA), the law that regulates the trade in commodities. Samuel Lim, the company’s former chief compliance officer, is also the target of the lawsuit.

“At Zhao’s behest, Binance advised its employees and customers to bypass (legal) compliance checks to maximize profits”says the CFTC in its complaint.
Another blow to Binance

Binance is usually accused of ignoring its legal obligations. Since 2019, the platform has not asked American investors for this present proof of identity to access its trading services. The CFTC even suspects Binance employees of explaining to users how to circumvent US restrictions on access to derivatives that enable lucrative but highly risky trading activities.

For example, employees allegedly advised users to go through a VPN to unlock derivatives while on US soil. To offer these services to Americans, Binance would first have to register with the SEC. In the eyes of the regulator, Changpeng Zhao knowingly wanted to circumvent the law to support the growth of his empire.

The CFTC is demanding that Binance no longer be allowed to offer financial services in the United States. The agency considers this one “warning to everyone in the digital asset community”. While it’s unclear how the courts will respond to the CFTC complaint, Adam Cochran, a partner at venture capital firm Cinnamhain Ventures, believes that “the case is devastating”. Before him tries to bring the supervisor “a fatal blow” to the leader of cryptoassets with a file full of evidence, including “insider conversation recordings”.

I mean, as optimistic as you are, you can’t believe that “the CFTC brought a case against us” is FUD because it legitimately happened.

It’s not a rumor, it’s not a matter of uncertainty, the case is devastating and has insider chat data…

— Adam Cochran (adamscochran.eth) (@adamscochran) March 27, 2023
A new wave of recordings

Binance has registered as a result of this complaint an increase in withdrawal requests. According to data shared by Nansen and relayed by The Block, $169 million was withdrawn within hours of the CFTC announcement, compared to $46 million in deposits. Binance was therefore rid of $123 million. Despite these withdrawals, the cryptocurrency titan still has $63.7 billion on its platform. This is already Binance’s third wave of withdrawals since November, and a disaster for its rival FTX.

Binance has $63.2+ billion in their publicly disclosed wallets, including:

$19 billion in $USDT
$14.5 billion in $BTC
$7.5 billion in $ETH
$7.1 billion in $BUSD
$3.2 billion in $BNB
And others

You can track their holdings and transactions here:

— Nansen Portfolio (@nansenportfolio) March 28, 2023
Unsurprisingly, Binance acted promptly to defend itself. Through its founder and CEO, the platform has upheld this complaint “unexpected and disappointing”. Changpeng Zhao recalls that Binance has been actively cooperating with all regulators, including the CFTC, for many years. The Chinese-Canadian entrepreneur points out that Binance blocks US users based on multiple dates, such as the KYC form (Know you Customer).which consists of providing a government-issued ID and a selfie, the IP address, the identified operator and the bank deposits made.

“No other company uses systems more complete or efficient than Binance”says Zhao, without mentioning the allegations about her employees’ alleged excesses.
Raw materials or financial securities?

In its complaint, the CFTC considers Bitcoin and Ether to be raw materials. That is why she felt it necessary to intervene. Indeed, the CFTC is responsible for the platforms that facilitate commodity trading. For its part, the Securities and Exchange Commission (SEC), the police officer of the financial markets, believes that cryptocurrencies, with the exception of Bitcoin, are rather effects, which requires exchanges to comply with the law regarding financial securities. The two agencies clearly disagree on the definition of a cryptocurrency…

This is the second blow against Binance in the space of a few weeks. Last month, the exchange was forced to bury BUSD, its own stablecoin, by order of regulators. By order of the state of New York, the company Paxos has indeed stopped issuing cryptocurrency. Indeed, the SEC believed that the stablecoin was a financial security, which therefore had to comply with securities laws.

Binance is not the only exchange in the crosshairs of US regulators. Regulators ordered industry veteran Kraken to cease some of its US operations in February. More recently, New York giant Coinbase received a dire warning.

Lead in the wing

bitcoin course binance cftc

The price of Bitcoin over the past seven days, according to CoinMarketCap.

The CFTC swing against Binance has kick-started the cryptocurrency’s uptick. After rising to $28,000, Bitcoin’s price fell around $26,500 shortly after the lawsuit was announced. Unsurprisingly, Binance Coin (BNB), the platform’s cryptocurrency, has also been unscrewed. The token, which has become the fourth cryptocurrency in the market thanks to Binance’s success, is now trading below $315.

BB of course

The price of BNB over the past seven days, according to CoinMarketCap.

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