As you guys heard, the largest crypto exchange platform Binance got a claim. It's a significant advancement in the market, as it has had many adverse effects on crypto assets. Why did Binance get sued? Why Changpeng Zhao also known as CZ was targeted by CFTC? What are the allegations? Will Binance have to shut down? What effects it had on the market? What happened to Bitcoin? All of these questions need to be answered. We will shortly dive into them.
Without further delay, let us just dive in...
Why Did Binance Get Sued?
CFTC, which is U.S. Commodity Futures Trading Commission, made some serious allegations against Binance CEO and founder CZ for operating what the CFTC alleged was an illegal exchange. The headlines on the 27th of March raid, CFTC issues Binance and CZ over willful evasion of U.S. laws. By willful evasion, the CFTC signaled over the unregistered crypto derivatives products used by Binance which led U.S customers to evade compliance controls through the use of VPN.
What Allegations Were Made?
The CFTC complaint against Binance includes several allegations, some of which are:
Binance offered and executed commodity derivatives transactions on behalf of U.S persons, violating U.S laws.
Binance's compliance program was ineffective.
Binance under the direction of ZHAO, instructed employees and customers to circumvent compliance controls.
Binance engaged in a calculated strategy of regulatory arbitration to gain commercial benefits.
Binance failed to register with the CFTC as a Futures Commission Merchant as required by law.
Binance failed to implement adequate know-your-customer and anti-money laundering procedures.
There are some more allegations made by CFTC which are included in its detailed report.
Why CZ Was Targeted?
Zhao and its former top compliance executive have been sued by the CFTC for deliberately avoiding U.S. laws while using a calculated approach of regulatory arbitration to gain commercial advantages. According to the CFTC complaint on Monday, Binance has violated U.S. laws by conducting commodity derivatives transactions for U.S. individuals from at least July 2019 until now. The CFTC also mentioned that Binance's compliance program has been inefficient, and the company directed by Zhao has instructed employees and customers to bypass compliance controls citing several practices. According to CFTC Chairman Rostin Behnam Binance Executives, they knew for years that they were violating CFTC rules working actively to both keep the money flowing and avoid compliance. These reasons led CFTC to sue Changpeng Zhao.
Will Binance Have To Pack Up?
No Binance will not have to pack up. Binance will either win in the court if they took it to court, which seems to be not the situation. Most likely there will be a settlement between the regulators and Binance and they will have to pay some fine. Either way, Binance will not shut down.
Zhao’s Response
Zhao, the CEO, and founder of Binance called the CFTC complaint unexpected and disappointing. In an initial assessment, the complaint seems to present an incomplete account of facts and we disagree with the portrayal of numerous issues as alleged in the complaint. Stated Zhao, Zaho particularly doesn't seem to be worried, as in a recent tweet he mentioned one of his previous tweets saying to ignore fud, fake news, attacks, etc. It looks like Zhao will not attend court in any case and will try to evade the problem.
Effects Of The Lawsuit On The Market
The recent actions by U.S. Regulatory Agencies against Binance may have market implications, as they seem to be part of a larger yet unannounced crackdown on cryptocurrency by the White House and some members of Congress. Binance, which controls around 60% of global cryptocurrency trading may experience reduced liquidity, if market makers step back from trading on the platform. Andif Binance US-based trading desks have to cease operations, warns crypto researcher Noel Atchison despite the charges from the CFTC the overall crypto market has remained relatively stable, up 2% at 1.2 trillion dollars over the past 24 hours to GoinGecko. Bitcoin is trading sideways at $27,986 as of the 4th of April, while Ethereum is up 5.76% at around $1,814. Binance's BNB token has also seen a 3% fall to $310, XRp on the other hand, has gained 12% trading at 53 cents, which is close to its highest level since October. The bullish outlook may be attributed to the classification of other major tokens
as commodities in the CFTc complaint against Binance. The U.S. Securities and Exchange Commission's Court battle against Ripple, a company associated with XRP maintains that the token is an unregistered security.
Effect On Bitcoin
Soon after the lawsuit was announced, Bitcoin fell 3.9% to $276,722. Along with Bitcoin, many of the other ALtCoins also fell. The reason behind this was the 1.6 trillion dollars withdrawn from Binance by investors. The investors took money out as a precaution, but as we have observed, the Binance lawsuit didn't have much effect on Binance itself, The market balanced itself. Bitcoin also balanced itself, as the current price of Bitcoin is $27,986.
So here was all of it. Thanks for being here and I hope you found this article helpful. What do you think of today's post? Do leave a comment and tell us what you want to learn about next.