The U.S. Commodities Futures Trading Commission (CFTC) sued Binance, the largest cryptocurrency exchange in the world, and its CEO and founder Changpeng Zhao on Monday for running an "illegal" exchange and a "sham" compliance programme, according to the agency.

CFTC sued Binance, Zhao, and its former compliance officer for "willful evasion" of U.S. law. "While pursuing regulatory arbitrage for commercial gain."

The cryptocurrency crackdown includes the regulator's probe. Bitcoin corporations violate criminal laws, therefore U.S. prosecutors and civil investigators have pursued them for years. Government engagement has grown.

The CFTC's Monday complaint claims Binance "offered and executed commodities derivatives transactions on behalf of U.S. persons from at least July 2019 to the present," breaking U.S. law.

Zhao has encouraged workers and users to avoid Binance's "ineffective" compliance procedure, according to the CFTC.

The CFTC accused Binance's former CCO, Samuel Lim, of "aiding and abetting" the company's offences. Lim ignored Reuters calls and emails.

Binance, which dominates the global digital asset market, would "collaborate" with regulators despite the "unexpected and disappointing" lawsuit.

The official said Binance had "significant expenses" to block U.S. users.

"Binance management knew they were infringing CFTC rules, acting willfully to keep the money flowing and evade compliance," stated CFTC Chairman Rostin Behnam.

CFTC regulates bitcoin and derivatives markets. Government-registered brokers assist US consumers to trade these products.

The US Justice Department has examined Binance for money laundering and sanctions breaches since 2018, Reuters reported in December. According to Reuters, Binance processed $10 billion for criminals and corporations evading US sanctions.

BNB, the fourth-largest cryptocurrency by market cap, fell 4% after the announcement.

Zhao, a 12-year-old multibillionaire Chinese immigrant to Canada, has not responded to the CFTC's charges.

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The "PIRATE SHIP"

Shanghai-based Binance leads the cryptocurrency industry. Last year, the Binance.com exchange processed $23 trillion in transactions, according to CryptoCompare. Zhao predicted $34 trillion in trade volumes in 2021 last year.

Despite having a Cayman Islands parent company, Binance has never revealed its principal exchange location. The CFTC accused Binance Holdings and two additional subsidiaries.

The CFTC stated Binance "failed to perform core compliance measures necessary to prevent and identify terrorist financing and money laundering" and did not require users to submit identity verification before trading.

The CFTC's lawsuit detailed Binance's efforts to retain American consumers after building a U.S. exchange in 2019 with a supposedly independent American firm to comply with U.S. regulations.

According to Reuters, Zhao controls BAM Trading, a US business Binance handles as a subsidiary. While hiring BAM's initial CEO, Zhao "described Binance as a pirate ship and added that he wished for Binance.US to be a navy boat," the CFTC reported.

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VIP CLIENTS

The CFTC alleges that Binance's global company coached its economically valuable U.S.-based "VIP clients" on how to circumvent its compliance controls while openly preventing U.S. consumers from trading on its platform.

The CFTC claims Zhao kept Binance's U.S. client base from senior management. In October 2020, Zhao ordered Binance personnel to insert "UNKWN" instead of "US" in various data fields in the company's internal database.

The CFTC alleges that Binance traded on its own platform using 300 "house accounts" held by Zhao, even though the exchange did not disclose this. The CFTC said Binance's "insider trading" policy didn't apply to home accounts.

A Binance executive told the Wall Street Journal in February that the company expected to pay fines to terminate U.S. inquiries.

The CFTC wants financial penalties, the restoration of unlawful gains, and long-term trading and registration bans.