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- Executives at Binance.US are concerned that the company may be unable to obtain specific licenses due to the lawsuit filed against Zhao by US regulators.
- In March, the US Commodity Futures Trading Commission filed a lawsuit against Binance and its CEO, Zhao, alleging that they operated an “illegal” exchange and a compliance program that was a “sham.”
According to recent reports, Binance.US and its founder Changpeng Zhao are exploring ways to decrease his ownership stake in the company due to the increasing crackdown by US federal regulators. The Information reported that CZ is currently the main shareholder of Binance.US, which has been under scrutiny by US federal regulators over the past year.
Earlier this year, the US Commodities and Futures Trading Commission (CFTC) filed a lawsuit against Binance.US and CZ for running an “illegal” exchange with a “sham” compliance program. The CFTC also accused them of “willful evasion” of US laws and regulatory arbitrage for their commercial benefit.
Binance.US executives believe that reducing Zhao’s stake could help improve the company’s standing with US regulators. Since CZ has been named in the CFTC lawsuit, the executives are concerned that the platform may not be able to obtain certain regulatory licenses as long as he remains the majority owner.
CFTC’s Charges Against Binance
During its lawsuit filed earlier this year in March, the US commodities regulator was seeking to put a permanent ban along with the registration ban on crypto exchange Binance. It stated that Binance lacks control over the possible illicit transactions taking place on the platform.
Since July 2019, Binance has been offering and executing commodities derivatives transactions to and for US customers. The CFTC alleged that Binance’s compliance program has been ineffective, wherein its clients and employees have been instructed to circumvent the compliance controls to maximize client profits. CFTC Chairman Rostin Behnam stated:
For years, Binance knew they were violating CFTC rules, working actively to keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of US law.
So far, there’s no official comment from BinanceUS over the reduction of his stake in the US entity. However, the recent regulatory crackdown shows that even giants like Binance have been facing heat from the regulators.
Crypto exchange Binance has claimed regulatory compliance in the entire matter stating:
We have implemented a robust ‘three lines of defense’ approach to risk and compliance.
