On Monday, July 24, Binance, the world’s biggest crypto exchange, and its executives filed a motion to dismiss a lawsuit filed by the Commodity Futures Trading Commission in March.
Based on adjacent CFTC lawsuits against crypto companies, how likely are Binance and founder Changpeng Zhao to succeed at dismissing the lawsuit?
Would the lawsuit’s dismissal green light investors get back on the platform, bringing back over $1 billion lost in investments?
In March, the CFTC filed a lawsuit against Binance and CZ, claiming that the exchange operated as an illegal exchange with a “sham” compliance program.
The lawsuit claims that Binance and CZ committed “willful evasion” of U.S. law “while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit.”
In his official response , company founder Changpeng Zhao stated, “Binance.com has developed best-in-class technology to ensure compliance. Binance.com is the first global (non-US) exchange to implement a mandatory KYC program, and remains today to have one of the highest standards in KYC and AML. We block US users by nationality (KYC), IP (including commonly used VPN endpoints outside of the US), mobile carrier, device fingerprints, bank deposit and withdrawals, blockchain deposits and withdrawals, credit card bin numbers, and more.”
He also added that “Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.”
Unlike the US Securities and Exchange Commission (SEC), the CFTC has yet to experience a landmark defeat in court.
Among the most notable cases of CFTC against a crypto company is a significant victory against Ooki DAO.
In June, U.S. District Judge William H. Orrick declared that Ooki DAO operated an illegal trading platform and unlawfully acted as an unregistered futures commission merchant (FCM). As a result, Ooki DAO was ordered to pay a penalty of $643,542, cease its operations permanently, and shut down its website effective immediately.
“The founders created the Ooki DAO with an evasive purpose, and with the explicit goal of operating an illegal trading platform without legal accountability,” reported CFTC Division of Enforcement Director Ian McGinley.
“This decision should serve as a wake-up call to anyone who believes they can circumvent the law by adopting a DAO structure, intending to insulate themselves from law enforcement and ultimately putting the public at risk.”
The CFTC also landed a sweeping win against Patrick McDonnell, who pleaded guilty to defrauding investors under the guise of using their funds to invest in cryptocurrencies back in 2019.
Given the CFTC’s near-flawless record of triumphs against crypto companies it deemed as “scams’, Binance is definitely facing an uphill battle in its attempt to dismiss its own case.
Moreover, Binance has already lost over $1.6 billion in investments as a result of the CFTC’s case. There isn’t a shred of doubt that Binance, CZ, and the former Chief Compliance Officer Samuel Lim would like to dismiss the CFTC case against it, most importantly to rebuild investors’ trust in the platform, but also to have one less legal issue to address.
Binance is already facing litigation from the SEC which includes thirteen lawsuits alleging serious violations, including commingling customer funds and wash trading.
CCN reached out for a statement on the matter, but Binance has yet to offer an official response.