- Binance CEO Changpeng Zhao has responded to CFTC charges of market manipulation.
- According to him, they do not agree with the characterization of many of the issues alleged in the complaint.
The Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action in the U.S. District Court for the Northern District of Illinois, accusing Changpeng Zhao and three entities that operate the Binance platform of several violations of the Commodity Exchange Act (CEA) and CFTC regulations. Right after the enforcement action was announced, CZ published a blog post to briefly respond to the charges captured in the filing.
Speaking on the CFTC allegation that the exchange did not require identity-verifying information from users before trading on the platform, CZ stated that Binance had integrated technologies to ensure full compliance. According to him, the company became the first global (non-US) exchange to establish a mandatory KYC program. He also stated that Binance maintains the highest standard of KYC and AML. He further disclosed that the platform blocked US users using different methods available. This, and many others make the complaint an incomplete recitation of fact as claimed by CZ.
We block US users by nationality (KYC), IP (including commonly used VPN endpoints outside of the US), mobile carrier, device fingerprints, bank deposits and withdrawals, blockchain deposits and withdrawals, credit card bin numbers, and more. We are aware of no other company using systems more comprehensive or more effective than Binance.
Response to transparency, license, and registration of Binance
On the allegation of lack of cooperation and transparency with law enforcement, CZ explained that the company has invested a lot in this, and the mere fact that it has over 750 people in its compliance teams with law enforcement and regulatory agency backgrounds speaks volumes. Currently, the company has handled 55,000+ LE requests and assisted US LE to freeze/seize more than $125 million in funds in 2022 alone. With the help of the exchange, about $160 million has been seized or frozen in 2023.
On the issues of licenses and regulations, CZ stated that Binance has the highest number of licenses/registrations globally, and is fully regarded by its user community.
On the charges of market manipulation, CZ explained that Binance does not trade for profit or manipulate the market in any way. CZ further explains that employees are subjected to a 90-day no-trading rule. Simply put, employees are not allowed to sell their coins within 90 days after their recent buy. The idea is to prevent them from active trading. In addition, employees are disallowed from trading in Futures. Those with access to private information such as listings are disallowed from buying or selling those coins. CZ also claims he is not exempted from this rule and has never participated in Launchpad, Earn, Margin, or Futures.
Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time-to-time to pay for my personal expenses or the Card.
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In conclusion, the Binance CEO re-emphasized that they are collaborating with regulators and government agencies around the world. While admitting that they are not perfect, he stated that the platforms and the staff maintain a high standard, even higher than the requirement of the existing regulations.
Most of the crypto assets have reacted with a marginal fall as FUD grows.
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