Ex-Binance CCO accused of aiding and abetting CFTC rule violations

The agency’s announcement Monday also included charges against former Binance Chief Compliance Officer Samuel Lim for aiding and abetting the exchange’s alleged violations of the Commodity Exchange Act (CEA) and CFTC regulations. Entities Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited were each named in the complaint, along with founder Changpeng Zhao.

The complaint, filed in U.S. District Court for the Northern District of Illinois, cited a number of violations at Binance, including:

• Failing to register as a futures commission merchant, designated contract market, or swap execution facility;
• Failing to diligently supervise whether its trading activities violated the CEA and CFTC regulations;
• Failing to implement a customer identification program that included know your customer (KYC) and anti-money laundering procedures; and
• Willfully evading the CEA and CFTC rules.

The CFTC said it is seeking disgorgement of Binance’s ill-gotten profits, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and agency regulations.

For his role, Lim is charged with willfully evading the CEA’s requirements and willfully aiding and abetting Binance’s alleged violations through intentional conduct that undermined the exchange’s compliance program, including encouraging customers to hide their identities and locations using virtual private networks (VPNs) or shell companies.

The details: Binance is the world’s largest cryptocurrency exchange. From July 2019 to the present, it has offered and executed commodity derivatives transactions to and for U.S. persons illegally, according to the CFTC. The exchange in August 2020 represented approximately 16 percent of its accounts were held by customers located in the United States.

Since 2017, Binance actively solicited and onboarded new U.S.-based customers despite claiming its compliance program was effectively blocking them from using the platform, the complaint said.

“Binance’s decision to prioritize commercial success over compliance with U.S. law has been, as Lim paraphrased Zhao’s position on the matter, a ‘(business) decision,’” the complaint said.

Binance response: In an emailed statement, a Binance spokesperson called the CFTC’s action “unexpected and disappointing, as we have been working collaboratively with the CFTC for more than two years.”

“We have made significant investments over the past two years to ensure we do not have U.S. users active on our platform,” the spokesperson said. Binance has 750 core and supporting compliance employees, ensures mandatory KYC for customers worldwide, and blocks all U.S.-based customers from accessing the platform, the spokesperson said.