Thread by @kyle_chasse

🚨 Breaking: CFTC Sues Binance & CZ - Unpacking the Allegations 📉 #BinanceLawsuit

The CFTC has sued crypto exchange Binance & CZ over allegations of knowingly offering unregistered crypto derivatives products in the US & violating federal laws.

Let's dive into the details.🧵👇

1/ 🔍 The lawsuit alleges that Binance operated a derivatives trading operation in the US, offering trades for cryptocurrencies like BTC, ETH, USDT, and BUSD, referred to as commodities in the suit. #Binance is accused of directing employees to use VPNs to spoof their locations.

2/ CFTC's Charges Against Binance📜

The CFTC is charging Binance with violating laws around offering futures transactions, illegal off-exchange commodity options, failing to register as a futures commissions merchant, designated contract market or swap execution facility & more

3/ 📉Market Impact: #Bitcoin and $BNB Price Drops 💸

Following the lawsuit filing, the price of #Bitcoin fell around $1,000, while Binance's exchange token BNB fell about 3%. Crypto-related stocks also experienced a decline after the news broke.

4/🕵️‍♂️ Binance's Alleged Evasive Tactics 🌐 #Binance
The CFTC claims that Binance used a maze of corporate entities to obscure its ownership, control, and location, deliberately hiding its true reach and operations. The filing said, "Zhao answers to no one but himself."

5/🔓#VPN Use by US Customers Encouraged📱#BinanceUS
The lawsuit alleges that Binance instructed US customers to use VPNs to conceal their true location, masking their IP addresses. Binance was allegedly aware of & encouraged this practice to evade restrictions on US customers.

6/ 🏝️ Shell Companies for Important Clients 🌍

Binance reportedly directed key customers like trading firms to set up shell companies in locations such as Jersey, the British Virgin Islands, and the Netherlands to avoid restrictions and escape scrutiny.

7/ 🇺🇸 U.S. Customer Base: A Substantial Proportion 📊 #BinanceUS

According to the filing, even after controls had supposedly been implemented in June 2020, Binance's internal monthly reports revealed that 17.8% of its customers were still based in the U.S.

8/ 💬 Internal Chats Reveal Evasion Tactics 🗣️ #BinanceLeaks

The CFTC filing highlights internal chats between Binance employees, including Samuel Lim, the exchange's chief compliance officer, where he appeared to direct an employee to ask U.S. customers to hide their location.

9/ 🚨 Binance and Sanctioned Entities 💣 #BinanceSanctions #CryptoCrime
The lawsuit also alleges that Binance was aware that sanctioned entities and individuals from sanctioned regions were trading on its platform, suggesting that the exchange facilitated illegal activity.

10/ 📝 Fake Compliance Report Allegations 📄 #FakeReport #BinanceCompliance
The CFTC claims that Binance tasked an employee with writing a fake compliance audit report to hide its poor compliance program from business partners like Paxos.

11/ ❌ No Confidence in Geofencing ⚠️ #Geofencing #CryptoSecurity
In 2020, Binance's Money Laundering Reporting Officer reportedly stated that they had "NO CONFIDENCE IN OUR GEOFENCING," according to the lawsuit.

12/ ⚖️ CFTC's Demands 🛑 #CFTCLawsuit #BinanceBan
The CFTC is asking the court to enjoin Binance from further violations of the Commodity Exchange Act, along with seeking civil monetary penalties, trading and registration bans, and disgorgement.

14/ 🗣️#Binance and CZ Respond 📢 #CZResponse

A Binance spokesperson said they would respond shortly, while Binance founder Changpeng Zhao tweeted "4," referencing a previous tweet where he said that would mean to "ignore FUD, fake news, attacks, etc."

15/ 💼 The Implications for Crypto Regulation 📜

The CFTC lawsuit against Binance may set a precedent in the ongoing jurisdictional question plaguing the US crypto sector, with both the CFTC & SEC vying to oversee crypto trading. Huge implications for the industry to follow? 👀