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First Coinbase, Now Binance: Big Fish in Choppy Waters1

Last week, the SEC took dead aim at Coinbase. This week, the CFTC did the same to Binance and its ubiquitous boss popularly known as CZ.

On March 27, 2023, the Commodity Futures Trading Commission (“CFTC”) filed a civil enforcement action in the U.S. District Court for the Northern District of Illinois charging Changpeng Zhao and three Binance entities with numerous violations of the Commodity Exchange Act (“CEA”) and CFTC regulations. The complaint also charges Samuel Lim, Binance’s former chief compliance officer, with aiding and abetting Binance’s violations. The agency seeks disgorgement, civil monetary penalties, permanent trading and registration bans.

According to the complaint, numerous Binance entities operate the Binance centralized digital asset trading platform through an intentionally opaque common enterprise, at the direction of CZ. The crux of the complaint is that Binance has acted as (unregistered) futures commission merchant (“FCM”) and therefore was subject to, but intentionally flouted, U.S. anti-money laundering laws (“AML”).

The complaint further charges Binance, CZ, and Lim with willful evasion of the requirements of the CEA, alleging they conducted certain activities outside the U.S. designed to avoid CFTC regulation, such as intentionally structuring their entities and transactions to avoid registration requirements and instructing U.S. customers as well as other customers as to how to evade Binance’s compliance controls.

Finally, the complaint charges Binance with acting as a designated contract market or swap execution facility based on its role in facilitating derivatives transactions without registering with the CFTC.

The 74-page complaint includes numerous alleged statements by CZ, Lim, Binance’s Money Laundering Resource Officer (“MLRO”) and others regarding Binance’s compliance efforts and activities in the U.S., including a message from Lim that Binance’s compliance efforts consisted of “email sending and no action. . . I guess you can say its ‘fo sho.’” and a message from the MLRO that “need[ed] to write a fake annual MLRO report to [an allegedly nonexistent] Binance board of directors.” to which Lim allegedly responded “yea its fine I can get mgmt. to sign” off on the report. The alleged statements paint a picture of apparent institutional disdain for complying with U.S. AML requirements.


This action against Binance further demonstrates the long arm of the U.S. government’s enforcement jurisdiction with respect to offshore exchanges, or at least how far regulators are trying to extend it. The CFTC argues that while Binance was not registered as FCM, it should have, and therefore it should have complied with U.S. AML laws. These charges are comparable to those from 2021 against BitMex for illegally operating a cryptocurrency trading platform and Anti-Money Laundering violations. AML claims may become the crypto industry’s equivalent of the tax charges brought against Al Capone.

SKrypto pic_March 30


1 Yes, we are mixing metaphors.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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Author's Assets

Casey Jennings

Casey Jennings | Counsel

A member of Seward & Kissel’s Financial Services Regulatory Group and Blockchain and Cryptocurrency Group, Casey advises financial services companies – including banks, broker-dealers, investment funds, service providers, and financial technology companies – on federal and state banking and securities law issues and the structuring of new financial products, including anti-money laundering, deposit issues, token offerings, custody of traditional and crypto assets, transfer and liquidity issues, Volcker Rule issues, and investments in crypto assets by funds and other investors. Before joining the firm, Casey served as counsel to the Consumer Financial Protection Bureau, where he developed and implemented financial regulatory policy, including the first CFPB rulemaking to rely on unfair, deceptive, and abusive acts and practices (UDAAPs) authority. Since then, he has:

  • Represented e-retailer APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of the online marketplace, OneGold.com.

“The whole notion of crypto is that there are no gatekeepers and the BSA requires that there be gatekeepers. Those two notions are very much at odds with one another. But the BSA is the best system that we’ve got right now.”

Casey’s perspective on crypto AML regulations as published in Cointelegraph article “How U.S. authorities are using old AML tools to crack down on crypto”


Logan Reitz | Law Clerk

Logan Reitz is a law clerk in the Investment Management Group at Seward & Kissel. Logan received a B.B.A, summa cum laude, from Temple University and a J.D. from Georgetown University Law Center.