Binance ( BNB-USD ) and its co-founder and CEO, Changpeng Zhao, have been sued by the Commodity and Futures Trade Commission, alleging that the cryptocurrency exchange violated certain trading and derivatives rules, according to a court filing dated Monday. Bitcoin ( BTC-USD ), a gauge of the broader crypto market, extended its decline after the suit was first filed, sliding 3.3% to $26.92K as of shortly before 12:00 p.m. ET. Binance coin ( BNB-USD ) also came under selling pressure, down 3.8% to $3143.71. The lawsuit, filed in federal court in Chicago, Illinois, alleged that Binance, the world's largest crypto exchange, solicited U.S. users via unregistered crypto derivatives offerings despite having no authority to conduct business in the country. Overall, Binance, Zhao and Samuel Lim, Binance's former chief compliance officer, allegedly broke eight provisions of the Commodity Exchange Act. They allegedly “actively cultivated lucrative and commercially important ‘VIP’ customers, including institutional customers, located in the United States,” said the regulator, which has been probing Binance since at least 2021. In addition, the centralized exchange directed its employees and customers to hide their true location by using virtual private networks (VPNs) to evade compliance controls, according to the CFTC. Binance did not immediately respond to a request for comment by Seeking Alpha. “VPNs have the effect of masking an internet user’s true IP address," the suit alleged. "VPN use by customers to access and trade on the Binance platform has been an open secret, and Binance has consistently been aware of and encouraged the use of VPNs by U.S. customers,” as they comprised a "substantial proportion of Binance’s customer base.” “Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors. I have been clear that the CFTC will continue to use all of its authority to find and stop misconduct in the volatile and risky digital asset market,” CFTC chair Rostin Benham said in a statement . More on the Crypto Clampdown Bitcoin Is Benefitting From Banking Sector Fallout Coinbase Downtrend Could Be Stronger Than You Think Some banks open doors for crypto firms after Silvergate, Signature downfalls - report G-7 said to promote tougher crypto rules amid global banking drama SEC warns of ‘significant’ risk of loss for crypto investors
