Cryptocurrency exchange Binance and CEO Changpeng Zhao will seek the dismissal of a Commodity Futures Trading Commission complaint accusing it of regulatory violations, a Monday court filing shows.
The CFTC alleged in Illinois District Court in March that Binance, Zhao, and former Chief Compliance Officer Samuel Lim violated the Commodity Exchange Act and other regulations while engaging in “a calculated strategy of regulatory arbitrage to their commercial benefit.”
According to the CFTC, Binance has both offered and executed commodity derivatives transactions for U.S.-based customers since July 2019, and for much of that time didn’t require identity verification for those trading on the platform, despite a legal duty to do so.
After Binance said it would restrict U.S. customers from certain trading, the CFTC alleged that the company informed customers about the “best methods for evading Binance’s compliance controls” and communicated with U.S. customers on an app set to automatically delete messages, avoiding a paper trail aligned to its U.S. customer retention efforts.
Monday’s court filing said that a response is due from the defendants in court by Thursday, at which time they plan to file at least two motions to dismiss the complaint, one from Zhao and Binance and another from Lim.
Lim left Binance in 2022 after working there for four years.
A Binance spokesperson declined to provide further comment, saying it “would have to wait until the motion is filed.” The CFTC did not respond to a request for comment.
The world’s largest crypto exchange is in hot water with other government agencies, too. The Securities and Exchange Commission alleged in June that Binance secretly allowed high-value U.S. customers to continue trading on it, despite assertions to the contrary; and alleged that Zhao and Binance secretly controlled the operations of the Binance.US platform despite claims that it was separate and independent.
The Department of Justice is also reportedly investigating the firm.