A new civil lawsuit against Binance filed by the Commodity Futures Trading Commission accuses the crypto giant of a host of charges, including failing to register its derivatives and failing to separate its services from US clients. But it’s also filled with specific details about the alleged criminal activities of the company’s top executives, whom the CFTC accuses of knowing about and engaging in criminal dealings.
“Internally, Binance officers, employees, and agents have acknowledged that the Binance Platform has facilitated potentially illegal activities,” reads the CFTC complaint, citing the example of a conversation between the former compliance officer Samuel Lim and another colleague in February 2019 about a transaction. with Hamas, a militant group. Lim reportedly told his colleague that terrorists usually send “small amounts” because “large amounts constitute money laundering”. The colleague replied, “can barely buy an AK47 with 600 dollars.”
Lim also admitted in February 2020 that some of Binance’s customers, including those from Russia, were involved in illegal activities, according to the complaint. Lim wrote in a chat message about these trades: “As come on. They are here for the crime. Money Laundering Reporting Officer at Binance replied at the time, “we see the bad, but we close 2 eyes.”
In another instance, a Binance employee allegedly asked Lim and another co-worker in July 2020 to remove a client who was sourcing more than $5 million from “questionable services” deemed illegal, according to the complaint. Lim wrote in response to the employee:
“Can let him know to be careful with his flow of funds, especially from darknet
like the hydra
He can come back with a new account
But this one has to go, it’s tainted”
Binance representatives did not return immediately Fortunerequest for comment.
Besides the latest CFTC lawsuit, Binance has been under investigation by the Department of Justice since 2018 for allegedly flouting US compliance laws, anti-money laundering rules and penalties. Crypto exchange may be preparing to pay settlement penalties worth over $1 billion, the the wall street journal reported last month.
Binance’s crackdown comes after the dramatic collapse of crypto exchange FTX, which pulled back last year. The CEO of this exchange, Sam Bankman-Fried, has since been accused of several criminal charges and is awaiting trial in the United States. SEC Chairman Gary Gensler has taken a tougher stance against the crypto industry in recent months. In December last year he compared crypto companies with casinos and said they must “comply with our tried and tested laws”.
In addition to details of discussions among Binance’s top officials, the CFTC’s complaint largely focuses on its alleged failure to disclose details of its work in the United States and non-compliance with compliance rules, alleging that during the first two years of operation, the company “did not take any action to limit or restrict the ability of US customers to trade on the platform. Even after Binance updated its Terms of Service limiting availability in the United States in 2019, customers could use loopholes including virtual private networks (VPNs) to access the sites, according to the lawsuit.It further alleges that CEO Changpeng Zhao and Lim were both fully aware of the existence of these flaws, and that in 2020, a year after Binance updated its terms of service, nearly 18% of its customer base was still located in the United States, citing reports income losses.
The complaint also alleges that Binance has knowingly obscured its structure, claiming that the company relies on a “labyrinth of corporate entities” that is deliberately designed to “obscure ownership, control, and location of the Binance platform. “. Binance’s offerings include websites and mobile apps, some of which are independently operated according to the complaint. The lawsuit alleges that Binance has become so good at hiding its operational structure and the location of its companies, “it even confused its own Chief Strategy Officer”, who incorrectly referred to Binance as a “Canadian” company the year last before being corrected by a spokesperson. . Zhao has long insisted that as a decentralized enterprise, Binance has no headquarters.