The Commodity Futures Trading Commission (CFTC) has accused Binance of permitting US-based trading firms to deal in cryptocurrency derivatives on its international exchange.
Giving firms registered in the US access to the derivatives platform is a clear violation of the rule established by Binance that American citizens are not permitted to trade on Binance.com.
The CFTC states that American companies have adopted offshore entities and alternative approaches to get on the Binance.com platform.
The regulator claimed, however, that Binance had been aware of the situation and had done nothing to prevent it.
In order to accommodate US-based traders, Binance established Binance.US, a distinct crypto exchange which, as claimed by Binance, adheres to US laws.
This week, on Monday, the CFTC leveled charges in a legal action against Binance for providing unregistered cryptocurrency derivative trading products in the US. Link to the lawsuit.
Within the week since the court case, Binance’s net outflows totaled approximately $2.2 billion, which CZ commented on in a tweet as “a bit of net outflow”.
Special access to more rapid trading for VIPs
The CFTC case against Binance has alleged that the company permitted US-based traders to utilize its international platform. Additionally, the lawsuit claims that Binance had offered certain VIP clients preferential treatment by providing them with faster trade execution.
An accusation was presented by the CFTC in which Binance was alleged to have provided a New York-based trading company with VIP status a five- to ten-millisecond advantage against non-VIP customers.
The organization which remained anonymous was referred to as “Trading Firm B” and was reportedly one of the most prominent customers of Binance.
On Thursday, Joe Saluzzi, a partner at Themis Trading, remarked to the Wall Street Journal about the exposed information. Saluzzi described how this benefit could be utilized by an individual to gain a financial advantage over others.
He remarked that were he to be among the other customers, he would be somewhat disgruntled.
A lawsuit that was not anticipated and disheartening
Changpeng Zhao, the CEO of Binance, has yet to make a statement regarding the claims that US traders were permitted to utilize Binance.com.
Despite the unexpected and discouraging lawsuit, he mentioned that his company has been in close cooperation with the CFTC for a period of over two years.
In a statement released on Binance’s website, CZ commented that upon a first analysis, they noticed an insufficiency of facts in the complaint and did not concur with the portrayal of many of the questions mentioned in the complaint.