In addition to indicting Zhao, the CTFC is also suing Samuel Lim, Binance’s former compliance chief, for alleged “complicity in Binance’s violations through willful conduct that undermined Binance’s compliance program.” According to the CTFC’s complaint, the agency alleges that as a result, Zhao, Lim and other executives “failed to properly oversee Binance’s operations” and “actively contributed to violations of U.S. law.”
The lawsuit also addresses some of the internal conversations that have come to light a report of The Wall Street Journal earlier this month, alleging that Binance “instructed” its US clients to use virtual private networks (VPNs) to hide their locations from trading on the platform.
While Binance itself does not operate in the US, its Binance.US affiliate, which operates as a separate entity, does. Binance has been criticized in the past for running a company that is essentially a “black box” because of how secretive Zhao has been about the company’s operations – and where the company is actually located.
“Binance’s reliance on a maze of corporate entities to run the Binance platform is deliberate; it is designed to disguise the ownership, control and location of the Binance platform,” the lawsuit states. “Binance has been so effective at obscuring its location and the identity of its operating companies that it has even confused its own Chief Strategy Officer.”
“Binance knew for years that they were breaking CFTC rules and were actively working to both keep the money flowing and prevent compliance,” CFTC Chairman Rostin Behnam said in a statement. “This should be a warning to anyone in the digital asset world that the CFTC will not tolerate deliberate circumvention of US law.”
Coinbase for example now facing enforcement action from the Securities and Exchange Commission — though it’s unclear exactly how broad that action is. Also, the SEC has charged Justin Sun (and a number of celebrities) with selling unregistered securities. Oh, and Terra/Luna villain Do Kwon may have just been arrested.
What I mean to say is that for a while it seemed like the US financial authorities were taking a laissez-faire approach to fintech. But then the good times stopped rolling.