Binance's biggest crypto exchange faces regulatory scrutiny

Binance's biggest crypto exchange faces regulatory scrutiny

The U.S. government on Monday took aim at the biggest target in crypto. Investors don't seem to care about the returns they're getting.

The value of crypto locked in the Binance-designed BNB blockchain has dropped 2.7%, while BNB, the token that powers that blockchain, has dropped 4.3% since news broke on Monday that the Commodity Futures Trading Commission had filed a civil suit against Binance, its founder and a former executive. The drop in the value of bitcoins has just barely outpaced a broader drop in crypto markets.

The lack of market reaction shows traders are confident the CFTC's actions won't disrupt Binance's operations. The lawsuit against crypto's biggest exchange is the latest in a series of regulatory actions that have prompted speculation that U.S. lawmakers are carrying out a coordinated effort against the cryptocurrency industry.

Binance's centralized exchange has also been muted from outflows. Users withdrew about $1.2 billion from the exchange on Monday. While substantial, that figure has been topped on two separate occasions this month alone, down from less than 2% of the stock's holdings, according to Defi Llama.

Binance has made little effort to screen customers during their account sign-up process, which is allowing criminals and Americans to trade on its platform, according to the CFTC lawsuit.

Zhao denied charges against him in a statement. Binance's analysts are confident that Binance will recover from the CFTC lawsuit.

Some attorneys flagged allegations in the complaint that could become fodder for a criminal investigation led by the Department of Justice. Details in the suit allege that Binance has been used by criminals and entities subject to U.S. sanctions.

The Commodity Futures Trading Commission said it was suing Zhao, three of the many companies that operate the Binance platform, and a former Binance executive. The CFTC is also seeking to fine Binance, permanently banning the company and its employees from trading commodities in the US, and clawing back money Binance made from customers based in the United States.

Own emails and chats reflect that Binance's compliance efforts have been a sham and Binance deliberately chose - over and over - to place profits over following the law, Lowe said in a prepared statement.

Shapiro, a prominent crypto lawyer, described the proposed penalties as 'aggressive and potentially destructive' but said there was no guarantee a court would grant those penalties if Binance were found guilty.