Changpeng Zhao and Justin Sun were sued by US agencies one after another The "gray rhinoceros" of the crypto industry is coming

Cai Lian News Agency, March 28 (Reporter Liu Huaixi Xu Cihao) At 23 o'clock Beijing time on March 27, the news that Zhao Changpeng was sued by the US Commodity Futures Trading Commission (CFTC) spread instantly. A few days ago, TRON founder Justin Sun was also sued by the U.S. Securities and Exchange Commission (SEC). There are signs that US financial regulators will significantly tighten their oversight of the crypto industry.

Some industry insiders analyzed that the US regulatory policy is the largest gray rhino in the cryptocurrency market, and now the US regulators continue to sue crypto companies and executives, indicating that this gray rhinoceros is now really "bumping over".

Alleged violations of the Commodity Exchange Act (CEA)

Binance and founder Changpeng Zhao were sued by the U.S. Commodity Futures Trading Commission (CFTC) in Chicago federal court on Monday for alleged violations of trading and derivatives rules. The CFTC alleges that Binance evaded certain obligations by not registering properly. Moreover, since at least 2021, the CFTC has been investigating whether Binance failed to prevent US residents from trading cryptocurrency derivatives.

The U.S. Commodity Futures Trading Commission (CFTC) said it will seek a permanent trading and registration ban on Binance in the Binance case, prohibiting trading, controlling, proposing, sharing, etc. involving commodity interests and cryptocurrency commodities.

On the morning of March 28, Beijing time, Changpeng Zhao responded on Binance's official website that Binance has cooperated with the CFTC for more than two years, expressing disappointment that it filed a civil lawsuit.

"Upon initial review, the prosecution appears to contain an incomplete statement of fact, and we disagree with the description of many issues, including compliance technology and denial of access to U.S. users, cooperation and transparency with law enforcement, registration and licensing, transactions, and more." It disclosed that Binance's current compliance team of more than 750 people, many of whom have backgrounds in law enforcement and regulators, has processed more than 55,000 enforcement requests to date and assisted U.S. law enforcement agencies in freezing/seizing more than $125 million in 2022 and $160 million in 2023. Zhao Changpeng said.

Metaverse NEWS reporters sent interview requests to Binance and Changpeng Zhao himself, but did not receive a response as of press time.

According to the lawsuit published by the U.S. Commodity Futures Trading Commission, it alleges that Binance, under the direction of Changpeng Zhao, inadvertently bypassed legal regulation by assisting chief compliance officer Samuel Lim, generating revenue from U.S. customers, prioritizing business success rather than compliance. While Binance has promised to restrict access to its platform for U.S. customers, the company relies on local U.S. personnel and suppliers, and actively nurtures U.S.-based VIP customers while hiding their identities and locations to evade regulation. Binance allegedly assists U.S. users in circumventing controls, for example, instructing them to use technology to disguise their location, continuing to allow transactions when controls are prohibited, and directing VIP clients to set up shell companies to evade compliance controls.

According to Binance's August 2020 filing, the platform generated $63 million in revenue from derivatives trading, and about 16 percent of the accounts were held by Binance as customers identified as based in the United States, the lawsuit filing. By May 2021, Binance's monthly revenue from derivatives trading had increased to $1.14 billion.

The lawsuit alleges that despite Binance's solicitation and reliance on U.S.-based clients to generate revenue and provide liquidity for its various markets, Binance never registered with the Commodity Futures Trading Commission (CFTC) in any way and ignored federal laws critical to the integrity and vitality of U.S. financial markets, including laws requiring controls aimed at preventing and detecting money laundering and terrorist funds, in violation of the Commodity Exchange Act (CEA) and other regulations.

Binance is "besieged" in many places around the world

As the world's largest cryptocurrency trading platform, Binance has a long history of "grudges" with US regulators.

Back in December 2022, there were media reports that the US Department of Justice was conducting a four-year criminal investigation into Binance, which began in 2018 and focused on whether Binance violated US anti-money laundering laws and sanctions. Some prosecutors believe they have gathered enough evidence to take positive action against Binance and have filed criminal proceedings against individual executives, including founder Changpeng Zhao.

AT THAT TIME, BINANCE OFFICIALS TOLD METAVERSE NEWS REPORTERS THAT U.S. REGULATORS ARE REVIEWING EVERY CRYPTOCURRENCY COMPANY. "The nascent crypto industry is growing rapidly, and Binance has demonstrated its commitment to security and compliance by investing heavily in its teams, talent, and tools and technologies to detect and block illicit activity."

In addition to the United States, Binance has been warned and even prosecuted by regulators in recent years in the United Kingdom, Japan, Malaysia, Thailand, Singapore and other countries. As the helm of Binance, Changpeng Zhao has repeatedly stated in a similar tone: "We want to be licensed everywhere and cooperate with regulators everywhere." ”

Metaverse NEWS reporters observed that Changpeng Zhao seems to be more willing to show people as a "evangelist" recently, frequently commenting on hot events in the industry on Twitter, trying to solve the siege for the crypto industry and Binance.

For example, on March 13, in response to the collapse of banks such as Silicon Valley Bank, Signature, and Silvergate, he tweeted that banks should use Merkle trees as proof of reserves and be transparent. On March 15, he tweeted that the claim that "cryptocurrencies are not secure" is incorrect and that trusted crypto services and platforms already have security comparable to or even better than traditional finance/KYC/AML.

On March 17, Changpeng Zhao said on Twitter that policymakers and crypto exchanges should strengthen cooperation. "Sound, risk-based policies will help create a competitive environment. Innovation must be done in a responsible manner to protect users. Policymakers should efficiently push for consistent and clear regulations. And crypto exchanges must continue to do the right thing, always putting users first. The crypto industry requires continuous progress on both sides, and the two sides are irreplaceable. ”

US Regulation is the "gray rhino" of the crypto industry

It is worth mentioning that US regulators have continued to exert high pressure on the crypto industry in the past six months.

On March 22, local time, the U.S. Securities and Exchange Commission (SEC) first issued a notice of Wales to Coinbase, the largest cryptocurrency exchange in the United States, indicating that mandatory action was imminent. Subsequently, the US SEC announced on its official website that it was suing Justin Sun, the founder of TRON and a member of Huobi Global Advisory Board, on suspicion of "fraud, market manipulation and illegal sale of securities."

Tracing recent events, first the insider trading scandal of FTX, a well-known US crypto exchange, and then the collapse of Silicon Valley Bank, Silvergate Bank and Signature Bank. The spate of events has hardened government figures who are already skeptical of the crypto industry and worried about investor protection. US SEC Chairman Gary Gensler is the most aggressive of the skeptics, repeatedly calling for cryptocurrencies to fall under the jurisdiction of securities laws.

"The crypto industry's space for the survival of U.S. finance is rapidly shrinking. The battle between crypto companies and the US government is already in full swing. An executive of a cryptocurrency exchange, speaking on condition of anonymity, described his observations to the metaverse NEW reporter.

Gu Yanxi, a crypto industry researcher and founder of Liyan Consulting, also feels the same. "I said in 2020 that U.S. regulation would be the biggest gray rhino in the cryptocurrency market," he said. The key question is not whether it will crash, but when and who it will crash. ”

Gu Yanxi said that now that US financial regulators are constantly suing crypto companies and executives, this gray rhinoceros is now really bumping in. "It's only natural that Binance, as the world's largest cryptocurrency exchange, will bear the brunt of this. As for the CFTC's rationale for suing, I believe it believes that Binance has a lot of violations of existing regulations, and only some of them are currently being sued. I believe that neither the SEC nor other financial regulators in the United States will be far behind in prosecution. ”

So, what short-term and long-term impact will the gray rhinoceros of US regulatory policy have on the crypto industry? Will it cause the price of Bitcoin to plummet?

Gu Yanxi replied to reporters: "In the short term, it will definitely lead to a sharp drop in the price of bitcoin." But cryptocurrencies are global markets, and they are not affected by a country's decisions and the rise and fall of one of the institutions. It will continue to evolve as long as the market welcomes it. ”

At about 23 o'clock on the 27th Beijing time, as soon as the news that Binance and Changpeng Zhao were sued by the US CFTC came out, the price of bitcoin fell from $27,500 in a short period of time, and the lowest fell to around $26,500; The price of BNB fell from a low of $325 to $310.