"The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime," the Binance statement continued. The number four is a call to Binance's devoted international userbase to dismiss negative publicity about the exchange as "fake news." "We have made significant investments over the past two years to ensure we do not have US users active on our platform," a Binance spokesperson said in a statement, calling the complaint "unexpected and disappointing."Įarlier in the day, Zhao posted a tweet that said "4" in an apparent response to the CFTC filing. KYC stands for know-your-customer, a set of principles that guide anti-money laundering programs for financial institutions and are a key part of fighting terrorist and illicit financing. Binance "can encourage them to be a non kyc account," Lim. Lim allegedly advised against outright fraud but encouraged "creative means" to sidestep regulations. On the surface we cannot be seen to have US users but in reality we should get them through other creative means," Lim told a Binance employee in 2020 according to the filing. "But as best we can we try to ask our users to use VPN or ask them to provide (if there are an entity) non-US documents. The CFTC filing alleges that Binance engaged in similar activity for its U.S. The use of virtual private networks and alternative non-state documents was advised by some volunteers and employees to mainland Chinese traders. law enforcement queries and had frozen $160 million at the direction of law enforcement year-to-date.ĬNBC previously reported on how Binance's customer service and VIP representatives counseled users in mainland China on how to evade Binance's compliance systems. Hours after the filing, Zhao released a statement, saying that he found the allegation didn't offer a complete representation of the facts, saying that Binance cooperated with international and U.S. "If the user is a big trader, or a smart one, he/she will get the hint." "Do not directly tell the user to run," Binance instructed its VIP team, the filing alleged. "Binance is aware of its VIPs' identities and geographic locations because Binance monitors its sources of transaction volume and fee-based revenue as a matter of course in conducting its operations," the CFTC complaint alleges.īinance's VIPs were offered special privileges when law enforcement agencies pursued them or froze their assets, the CFTC alleged, claiming Binance gave VIPs a heads up or suggested they take their assets off the platform. users was the exchange's VIP program, for high net worth individuals, the CFTC filing said. This was part of a larger strategy that Zhao said was an effort to "keep countries clean," the regulator alleged in the filing.Ī key part of Binance's alleged effort to generate fees and solicit U.S. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market," CFTC chair Rostin Benham said in a statement.īinance and Zhao took steps to purposefully obscure where the exchange's subsidiaries were located, the regulator said. "Today's enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors. Zhao and Lim allegedly "actively cultivated lucrative and commercially important 'VIP' customers, including institutional customers, located in the United States," the complaint said. Just days prior to the CFTC filing, CNBC reported on how Binance employees worked to subvert the exchange's compliance controls in China, using some of the same techniques that the CFTC alleges Binance to solicit U.S. The regulator alleged that Binance, Zhao, and Lim violated eight core provisions of the Commodity Exchange Act, including laws that require controls "designed to prevent and detect money laundering and terrorism financing." Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Best Debt Consolidation Loans for Bad Credit
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