It was just a matter of time before this happened to @binance: US Commodity Futures Trading Commission (CFTC) has filed a lawsuit (and here's that document in PDF) against Binance, and its CEO, Changpeng Zhao, for allegedly violating US laws against offering futures transactions, failing to register as a futures commissions merchant and poorly supervising operations, among other things.

For the crypto community, the lawsuit against the world's largest cryptocurrency exchange does not come as a surprise. However, with the general regulatory pressure from the US authorities and news about Kraken and Coinbase, it might be expected.

It's worth mentioning that most of the CFTC's allegations likely pertain to past practices. One might assume that Binance has made significant efforts to address issues and comply with regulations in recent years. However, it's hard to determine the future of Binance.US, and the lawsuit doesn't bode well for the exchange's prospects.

The former CFTC chairman also believes the CFTC's filing "is a big deal." And for your convenience, Blockworks listed the "7 most damning quotes” from the lawsuit. Also, according to Decrypt, the charges against Binance are harsh, and fines could be business-ending.

Binance CEO CZ, on his turn, called the complaint filed by the CFTC "unexpected and disappointing," as they "have been working collaboratively with the CFTC for more than two years."

Binance CEO CZ, on his turn, called the complaint filed by the CFTC "unexpected and disappointing," as they "have been working collaboratively with the CFTC for more than two years."

In the official response above, CZ called CFTC's suit an "incomplete recitation of facts" and disagreed "with the characterization of many of the issues alleged in the complaint." He also revealed a copy of a letter to US senators (weeks before the lawsuit) detailing Binance's transparency efforts, experience with regulators, and challenges of dealing with government:

But how does the crypto market react to these ‘big deal’ charges? Well, BNB slips about 5%, Binance's BUSD stablecoin suffers $500M outflows, Bitcoin… One could see worsening liquidity signs, but at the end of the day, it looks and feels like just consolidating. And Bitcoin on-chain data shows no signs of FUD among Binance users somehow, according to CryptoQuant.

It is probably worth noting that the US market only accounts for a small fraction of Binance's total user base. A quick Google search shows "the Binance.US number of users was 2.5 million in August 2022. At the same time, there were ~90 million total platform users." Despite this, it's clear that CFTC is aggressively pursuing Binance's operations in the country, and the lawsuit remains serious. Binance has been preparing for legal action from the US Government, and an article from a month ago suggested that the exchange was preparing its checkbook to pay fines. However, given the nature of the new charges, one can hardly guarantee that the case will be settled with fines.

And with that in mind, one should consider another Binance-related 'leak.' A recent CNBC article reported that Binance employees have been helping Chinese citizens use the platform, subverting the country's efforts to eradicate cryptocurrencies. Binance employees and volunteers called "Angels" have been sharing techniques that can be used to evade Binance's KYC, residency, and verification systems. They have also provided tutorials and techniques on falsifying government documents to pass KYCs and approvals.

At first glance, the evidence against Binance here is seemingly clear – including direct messages between CZ and other executives discussing the alleged issues and using Signal, a specialized messaging platform with an auto-delete functionality – which may have a negative impact on the upcoming trial.