Binance, one of the world’s largest cryptocurrency exchanges, is facing a lawsuit filed by the United States Commodities Futures Trading Commission (CFTC) for allegedly violating US law by allowing US clients to trade on its platform without complying with Know Your Customer (KYC) standards. In the lawsuit, the CFTC identified three trading firms – Jane Street Group, Tower Research Capital, and Radix Trading – as Binance’s VIP clients, who allegedly received preferential treatment from the exchange.
According to Bloomberg, which cited “people familiar with the matter,” Radix Trading was identified as “Trading Firm A” in the CFTC’s suit, while Jane Street was “Trading Firm B” and Tower Research was “Trading Firm C.” The firms on the CFTC’s list were examples of US clients allegedly able to access Binance, despite not complying with KYC standards.
The alleged “VIP” treatment from Binance included lower transaction fees and faster trading services, according to the CFTC’s filing. The firms provided Binance with liquidity on the exchange, and Binance gained the corresponding trading fee revenues. This was part of a strategy that “actively facilitated violations of US law” by helping US trading firms evade KYC compliance standards, among other things, the CFTC alleged.
In a report by The Wall Street Journal, Radix Trading’s co-founder Benjamin Blander stated that he believed the firm acted legally even when trading with Binance’s offshore entity. He also claimed that Binance enabled Radix to sidestep compliance controls by providing them information on accessing Binance.com through a virtual private network to obscure its IP address.
The CFTC claimed that Binance prioritized “commercial success over compliance with US law,” enabling US trading firms to violate US regulations. However, Binance’s CEO Changpeng “CZ” Zhao vehemently denied the allegations of compliance and market manipulation violations in a follow-up post on March 28.
Binance has faced several regulatory challenges in recent months, including regulatory warnings and investigations from countries such as Japan, the UK, and Canada. The exchange has also been banned in countries such as China and India. Despite these challenges, Binance remains one of the world’s largest cryptocurrency exchanges, with a daily trading volume of over $40 billion.