Cryptocurrency exchange giant Binance and its CEO, Changpeng Zhao, have filed a motion to dismiss a complaint filed against them by the Commodity Futures Trading Commission (CFTC). The CFTC’s lawsuit alleges various violations of the Commodity Exchange Act and federal regulations, accusing Binance of operating an “illegal” exchange and maintaining a “sham” compliance program. Former Chief Compliance Officer Samuel Lim is also named in the lawsuit.
Binance’s motion to dismiss centers on the argument that the CFTC’s case is attempting to regulate foreign individuals and businesses that operate outside the United States. To support their stance, the company cites a 2007 legal decision which clarifies that U.S. law is applicable domestically but not internationally. Binance’s holding corporation is situated in the Cayman Islands, and its CEO, Changpeng Zhao, is a Canadian citizen.
According to the CFTC’s accusations, Binance violated U.S. law by engaging in commodity derivatives transactions for U.S. persons, starting at least in July 2019. In response to this claim, Binance contends that they took proactive measures to comply with U.S. regulations. The company asserts that in June 2019, they restricted and removed potential U.S. users from accessing Binance.com. Furthermore, Binance denies providing alleged digital asset derivative products to U.S. customers after implementing these measures.
Notably, Samuel Lim, the former Chief Compliance Officer at Binance, has filed a separate petition seeking to have the CFTC’s allegations against him dismissed, indicating that he intends to contest the charges independently.
The CFTC, in response to the motion to dismiss, has declined to provide any comments on the ongoing legal proceedings.
Adding further complexity to the situation, the U.S. Securities and Exchange Commission (SEC) also took legal action against Binance and its CEO, Changpeng Zhao, earlier this year. The SEC’s lawsuit charged the company and its CEO with 13 counts related to running a fraudulent operation, including claims related to the purported independence of their U.S. exchange.