SEC, CFTC, IRS, DOJ – Here are the Ongoing Investigations Into Crypto Exchange Binance

The world’s biggest crypto exchange by volume, Binance, is no stranger to clashing with various regulators around the globe. However, things seem to be getting hot recently, as investigations that have lasted for years are now leading to formal charges.

Trouble With the CFTC

Earlier this week, the Commodity Futures Trading Commission (CFTC) charged the exchange with an alleged violation of trading and derivatives laws. In the lawsuit, the Commission also takes aim at Binance CEO Changpeng Zhao and Samuel Lim, the former chief compliance officer of the exchange.

CFTC claims that Binance has chosen to ignore compliance. The agency accuses the firm of offering derivatives to United States clients without proper registration. Additionally, CFTC alleges that Binance failed to ensure strict adherence to Know-your-customer and anti-money laundering policies.

On top of that, the agency further claims that the exchange helped American customers avoid regulators. It also calls out Zhao for allegedly using his firms to trade on Binance without disclosing this activity.

Bloomberg reports that CFTC first launched an investigation into Binance over illegal trading practices in the United States markets in February 2021. By September of that year, the agency had expanded the investigation to include insider trading allegations.

The regulator now wants the court to ban Binance from operating in the United States and pay several fines.

In response to the lawsuit, Zhao said the CFTC is only trying to spread FUD (fear, uncertainty, and doubt).

Long-Running Internal Revenue Service and Justice Department Cases

A Reuters report indicates that Justice Department has been probing Binance since 2018. The investigation, which also involves the Internal Revenue Service (IRS), focuses on the exchange’s compliance with anti-money laundering policies alongside potential tax-related offenses.

Reuters recently revealed that Binance’s attorneys held discussions with Justice Department officials to explore the possibility of settling the cases. The exchange argued that if the agency went ahead to prosecute the company, it would cause more damage to the crypto industry, already crushed by FTX’s collapse last year.

SEC Vs. Binance

The US Securities and Exchange Commission (SEC) has kept a close eye on Binance for quite some time. In 2022, Wall Street Journal disclosed that the regulator was probing the relationship between Binance US and Zhao’s two trading companies, Merit Peak ltd and Sigma Chain AG. These two firms have been mentioned in the CFTC’s lawsuit, which claims that the Binance CEO used them to trade on Binance but failed to register with the agency.

Following the charges, some crypto observers have drawn comparisons between Zhao’s trading companies and Binance and the improper relationship between Sam Bankman-Fried’s Alameda Research and FTX.

Bankman-Fried allegedly placed risky bets using customer funds without their knowledge, causing the downfall of FTX. However, CFTC did not accuse Zhao of misappropriating client money.

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