“Given these meltdowns and bankruptcies, it’s made it a lot easier for regulators to pull the trigger,” he notes. Recent chaos with companies like FTX has likely emboldened regulators, says Duke University finance professor Campbell Harvey. The CFTC’s actions highlight how regulators are continuing to confront crypto companies, and also follow another lawsuit from the Securities and Exchange Commission against Ripple Labs, another crypto company. The CFTC suit also alleges that the platform hasn’t done enough to combat potential money laundering and other crimes that it could be used for. One of the core issues in the Binance lawsuit is that it willfully tried to avoid US regulations by allowing American customers to engage in illegal purchases and trades via VPN and other tactics that wouldn’t give away their location. Binance is well-known globally and is a dominant exchange abroad, while other exchanges like Coinbase are more established in the US. Previously, Binance also reportedly considered bailing out cryptocurrency exchange FTX when it declared bankruptcy amid its founder Sam Bankman-Fried’s legal troubles, though it ultimately decided against doing so.
“Concerns regarding Binance’s compliance and regulatory practices have been raised for some time, and the evidence brought forth by the CFTC is quite damning.” What this could mean for crypto overallįor those who may not know Binance as well, it’s one of the biggest crypto exchanges in the business and it handled approximately $23 trillion in trades in 2022. “The cryptocurrency industry has recently faced several significant challenges, beginning with the Terra/Luna meltdown, followed by FTX, and now Binance,” says MIT Cryptoeconomics Lab founder Christian Catalini. That would deal a serious blow to Binance’s derivatives revenues, 16 percent of which comes from the US, CNN notes. If the CFTC suit is successful, it could result in “hundreds of millions” in fines as well as a possible ban on Binance’s ability to register as a derivatives trader in the US down the line. The lawsuit could have bigger impacts for Binance’s business long-term, according to a report from CNN’s Allison Morrow. Since then, investors who use the platform have pulled out $1.6 billion, a significant uptick in withdrawals, though experts note that Binance’s reserves may be big enough to withstand such a hit. Binance CEO Changpeng Zhao has called the lawsuit an “incomplete recitation of facts” in response. The lawsuit, which was filed on Monday, alleges that Binance intentionally evaded US laws including failing to register in the country and allowing Americans to trade crypto derivatives, which is barred for retail investors.
It’s the latest example of the increased federal scrutiny the industry has been under following a wave of scandals in the last few years. Binance, the world’s largest cryptocurrency exchange, is dealing with some major uncertainty after getting hit with a lawsuit from the US’s Commodity Futures Trading Commission, or CFTC.
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