Binance Responds to CFTC Lawsuit with Official Submission
In a significant development in the cryptocurrency industry, Binance, the world’s largest cryptocurrency exchange by trading volume, along with its top executives, submitted their formal response on Monday to the lawsuit filed by the U.S. Commodity Futures Trading Commission (CFTC). This legal action has drawn widespread attention as it could have far-reaching implications for the regulatory landscape of digital currencies.
The lawsuit, initiated in March, targeted the exchange, its CEO Changpeng “CZ” Zhao, and former Chief Compliance Officer Samuel Lim, alleging legal violations.
In a submission made on October 23 to the U.S. District Court for the Northern District of Illinois, the legal representatives of CZ and Binance presented multiple legal arguments favoring the dismissal of the CFTC’s case against the cryptocurrency exchange. According to their legal counsel, accepting the regulator’s arguments would grant the CFTC authority to oversee any global cryptocurrency-related activity associated with derivative products.
“Congress did not make the CFTC the world’s derivatives police, and the Court should reject the agency’s effort to expand its territorial reach beyond what is permitted by the law,” stated the filing.
The document went on to state, “The CFTC’s response brief underscores the pleading deficiencies in the Complaint and confirms that the agency’s overreaching theories of its jurisdiction are unfounded.”
In March, the CFTC cited Binance for violating a minimum of eight trading regulations specified in its derivatives rule. In response, CZ expressed disappointment, characterizing the action as an “unexpected and disappointing civil complaint.”
In July, the global exchange’s CEO filed a motion to dismiss the complaint, separately from the former COO. Subsequently, the SEC introduced fresh charges against Binance entities for violating securities laws, coinciding with increased regulatory scrutiny in various regions.
The recent filing also raises concerns about how the CFTC treats the defendants as a single entity. The document noted, “The CFTC acknowledges that the Complaint ‘lumps’ the Foreign Binance Entities together.” Furthermore, the response emphasizes that the attempt to attribute the Foreign Binance Entities’ actions to Mr. Zhao through an agency relationship cannot be substantiated based on the provided evidence and instances.
In July, Binance’s legal team submitted a comparable filing seeking the dismissal of the case, arguing that the CFTC had overstepped its regulatory jurisdiction. Additionally, the cryptocurrency exchange is confronted with a lawsuit from the U.S. Securities and Exchange Commission, initiated in June.
