The United States Commodity Futures Trading Commission (CFTC) has served legal papers to the largest crypto exchange in the world, Binance. The basis of their lawsuit against Binance is that the exchange broke some of its commodities and derivative rules. The case was filed to Binance on the 27th of March. Its central argument was that Binance offered derivatives trading services to U.S. customers without following guidelines or having a derivatives license.
For many months now, many have expected the Securities and Exchange Commission to make a move against Binance but were surprised by the CFTC outburst. Binance regulatory issues have lingered for a long time, and the CFTC lawsuit only adds salt to the injury. Many crypto enthusiasts and observers believe the lawsuit against Binance was politically motivated. A Fox news reporter, Eleanor Terrett, tweeted that those with explicit knowledge of the case said CFTC was making a point against the SEC. According to close sources, CFTC wanted to show the SEC that the issue with Binance was commodity-based, not securities.
While reporting on Twitter, Eleanor Terrett said, "According to sources familiar, the @CFTC lawsuit was dropped on @binance without warning, similar to @coinbase's Wells notice. Some industry professionals believe this was a political move by the CFTC to show the SEC that this is a commodities issue rather than a securities one. They also say "Vegas odds" have the @SECGov rushing out a similar lawsuit against @binance as a counter."
What is the Lawsuit About?
The Binance lawsuit by The United States Commodity Futures Trading Commission (CFTC) accuses the crypto exchange of putting US customers in danger. According to their filing, Binance preferred to get commercial success at the expense of US customers and disregard regulatory laws. In the lawsuit, Binance CEO Changpeng Zhao and his company were accused of seven violations of CEA/CFC/USC rules.
Binance's U.S. trading arms Merit Peak and BAM are targets in this case, as regulatory violations aren't the only hurdle. CFTC alleged that Binance CEO controls almost all the companies affiliated with them. In their allegations, the CFTC demanded the CEO of Binance should be banned from engaging or controlling any commodities company. Apart from Binance CEO, the case also affects those who are top executives in the crypto exchange.
CFTC Lawsuit a Death Blow to Binance
According to a crypto observer Adam Cochran, he said that the case against Binance wasn't just any kind of case. According to him, it will have many consequences that might exterminate Binance from operating in the United States. While mentioning the consequences that Binance might get from the case, Adam Cochran said that there might be a little safe option for the company: settlements.
In his words, Adam Cochran said on Twitter, "
Only semi-safe path for Binance here is likely a settlement which CFTC would still push for the billions in make whole, disgorgement, and civil penalty payments but may allow CZ et al to avoid admission of guilt." He also added that Changpeng Zhao and his company getting off the hook, in this case, would be very hard for his company and group of lawyers.