A US Federal regulatory agency just filed a lawsuit against Binance – the world’s largest crypto exchange – for a sweeping range of regulatory violations, spooking Bitcoin back down to $27,000. 

Here’s what the Commodities and Futures Trading Commission (CFTC) believes the company and its CEO, Changepeng Zhao (CZ), are guilty of.

Binance’s Violations

According to the CFTC’s complaint, Binance has accepted orders and facilitated trade involving multiple digital assets for customers within the United States, which the agency deems commodities. 

Some of those commodities, according to the regulator, include Bitcoin (BTC), Ether (ETH), and Litecoin (LTC). While there is wide agreement across agencies and parliament that Bitcoin is a commodity, the Securities and Exchange Commission (SEC) has made numerous suggestions alluding to Ether being a security instead. 

Though Binance is supposed to not serve US-based customers (except through the separate and independent firm Binance US), the CFTC alleges that its presence within the country has gradually expanded over time – particularly to commercially important institutional “VIP” customers. 

Despite knowing this would place regulatory and registration requirements on Binance, the exchange, and CZ both ignored those requirements and helped customers evade the firm’s access controls, according to the CFTC.

Binance’s disregard for such laws has been quite profitable: it pulled in $1.14 billion in revenue from derivatives transactions in May 2021 alone. Meanwhile, about 16% of accounts at the exchange had been identified by Binance as being located in the United States. 

The exchange is also accused of using and encouraging various techniques to escape regulatory requirements. This includes not establishing a fixed headquarters in any one location so that Binance won’t be subject to the laws of that area. 

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