7 Damning Quotes From the CFTC Binance Lawsuit

Binance’s execs are quoted extensively in the CFTC complaint

article-image

Kutsenko Denis/Shutterstock modified by Blockworks

share

The CFTC has sued Binance and two of its executives, CEO Changpeng Zhao and Samuel Lim, the exchange’s former chief compliance officer. In its complaint, the regulatory agency has included numerous internal communications that it claims show deliberate obfuscation and efforts to sidestep regulation.

Here are some of the most damning quotes from the CFTC complaint.

That pesky OFAC problem

According to the complaint, in 2018 Lim acknowledged that Binance was operating “in the USA” and advised his colleagues that “there is no fking way in hell I am signing off as the cco for the ofac shit.”

The US Office of Foreign Assets Control (OFAC) administers and enforces trade sanctions, and much of the document produced by the CFTC is concerned with Binance’s alleged efforts to avoid such oversight.

Terrorists send small sums

The complaint alleges that in February 2019, after receiving information “regarding HAMAS transactions” on Binance, Lim explained to a colleague that terrorists usually send “small sums” as “large sums constitute money laundering.” Lim’s colleague replied: “can barely buy an AK47 with 600 bucks.”

KYC optional

The CFTC continues, with the ever-more loose-lipped Lim allegedly stating in January 2019 that “Cz doesn’t wanna do us kyc on .com.”

2 BTC limit and US citizens

Regarding the implementation of a 2 bitcoin trading limit for non-verified customers, in 2019, Lim apparently told Zhao that “a huge number” of Binance’s “TIER 1 [meaning customers trading via the two BTC-no KYC loophole] could be US citizens in reality. They have to get smarter and VPN through non-U.S. IP.”

We’re doing things that are not in line with the US

The complaint states that during a management meeting in June of 2019 Zhao stated that “[T]here are a bunch of laws in the US that prevent Americans from having any kind of transaction with any terrorist, and then in order to achieve that, if you serve US or US sanctioned countries there are about 28 sanctioned countries in the US you would need to submit all relevant documents for review [but that is not] very suitable for our company structure to do so. So, we don’t want to do that and it is very simple if you don’t want to do that: you can’t have American users. Honestly it is not reasonable for the US to do this . . . . [U.S. regulators] can’t make a special case for us. We are already doing a lot of things that are obviously not in line with the United States.”

VPNs are not very subtle

The CFTC states that in March 2019, Lim said: “We are actually pretty explicit about [encouraged VPN use] already – even got a fking guide. Hence CZ is ok with blocking even usa.”

Creative onboarding of US users

The ever-obliging Lim allegedly told an employee that, “On the surface we cannot be seen to have US users but in reality we should get them through other creative means.”

Who’s in Chicago?

The complaint notes that a VIP team member contacted Zhao regarding a “Chicago-headquartered trading firm.”

VIP team member: Hi CZ . . . I went through list of affected API clients, it includes a number of large strategic accounts including [a Chicago-headquartered trading firm] who is currently is a top 5 client and 12% of our volume

Zhao: Give them a heads up to ensure they don’t connect from a us Ip. Don’t leave anything in writing. They have non us entities. Let’s also make sure we don’t hit the biggest market makers with that email first. Do you have signal?”

Bonus Quote: If you don’t say US, you might still mean US

The CFTC says that in a November 17, 2020 internal chat, the Director of Operations at Binance made the decision to note that “at present, the keyword US for internal information is also a sensitive word, so you have to use Unknow to mark the country.”


Despite Binance’s long-standing protestations of compliance, the CFTC appears to have significant and detailed information to support its complaint. And that can only be bad news for Binance.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg

Research

The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.

article-image

Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral

article-image

Sponsored

Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM

article-image

The side events were the places to be at Consensus 2024, according to attendees

article-image

Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them

article-image

I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right

article-image

Also, the ETF hype train can count out at least one member