Binance Is Hiding Crypto Activity, Regulator Says

Federal regulators sued Binance, the world’s largest cryptocurrency exchange, and two of its senior executives Monday, alleging that in wooing business from American investors, they had chosen to “knowingly disregard” laws governing certain U.S. financial markets.

In a suit filed in a Chicago federal court, the Commodity Futures Trading Commission said Binance’s founder, Changpeng Zhao, and its former chief compliance officer, Samuel Lim, worked together to attract trading customers who were based in the United States despite the fact that Binance did not have permission to operate in the country.

The regulators said Zhao and Lim relied on an “opaque web of corporate entities” to direct business back to a central operation that was controlled by Mr. Zhao. They even helped U. S.- based crypto traders hide their real locations using shell companies, according to the C.F.T.C.

“For years, Binance knew they were violating C. F. T. C. rules, working actively to both keep the money flowing and avoid compliance,” the agency’s chairman, Rostin Behnam, said in a statement. “This should be a warning to anyone in the digital asset world that the C.F.T.C. will not tolerate willful avoidance of U.S. law.”

A Binance spokesman did not respond to a request for comment.

The C.F.T.C. is seeking fines, according to Monday’s filing, though no amounts have been specified. The regulator wants to ban the company, as well as Zhao and Lim and any direct associates, from participating in the trading of commodities in markets governed by U.S. exchange laws.

The civil suit against Binance is the latest in a string of blows to the cryptocurrency industry over the past year, including the collapse of what was the second largest cryptocurrency exchange, FTX, in November. Its founder, Sam Bankman-fried, now faces securities fraud charges.

Though Zhao and Bankman-fried were considered rivals, there was no real contest for business between the two companies. Binance dwarfed FTX. Yet Zhao was long seen as the more elusive foil to Bankman-fried, who actively courted U.S. politicians and regulators.