This is a tale of two suits. For crypto critics gouging on schadenfreude, it was the best of times. For crypto titans and the industry as a whole, it was the worst of times. This week, the Commodity Futures Trading Commission sued crypto exchange Binance for having an “ineffective compliance program” and "knowingly" breaking the law. According to The Verge, "the CTFC also charges Samuel Lim, Binance’s former chief of compliance, for allegedly 'aiding and abetting Binance’s violations through intentional conduct that undermined Binance’s compliance program.'" The CTFC alleges Binance executives “failed to properly supervise Binance’s activities” and “actively facilitated violations of U.S. law." Meanwhile, the Securities and Exchange Commission has issued a Wells notice to Coinbase (also a crypto exchange) alerting them that the SEC had discovered potential violations of securities laws following an investigation that began last summer.
- Binance CEO Changpeng "CZ" Zhao responded to the CTFC suit in a blog post, stating that “the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.”
- Coinbase also responded to the Wells notice in a regulatory filing, stating "based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet… The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”
It remains to be seen if federal regulators catch up with the industry in time to curb its excesses, but with no sign of regulation on the horizon (let alone politicians who even understand what crypto is), consumers will continue to operate in this market without protection.