The United States Commodity Futures Trading Commission (CFTC) had its emergency motion for a stay and immediate interim relief in its case against prediction market Kalshi thrown out.

After Kalshi’s successful lawsuit against the CFTC, in preparation for its appeal, the commission filed the motion seeking a delay in Kalshi’s ability to resume offering prediction markets in elections.

According to the opinion that accompanies the rejection of the motion, the CFTC “has failed at this time to demonstrate that it or the public will be irreparably injured” absent the stay or immediate relief.

However, the opinion does also note that “the question on the merits is close and difficult.”

In a separate aside, the opinion also raises the question of whether or not Polymarket has complied with its obligation to block access to US persons.

Read more: Prediction markets like Polymarket triple despite US ‘ban’

Kalshi founder Tarek Mansour took to X to claim, “US presidential election markets are legal. Officially. Finally.”

The CFTC’s appeal can, and almost certainly will, go forward and it has a history of being successful against prediction markets.

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Thanks to the US presidential election, the total value of crypto assets on prediction markets according to DefiLlama has tripled this year. That growth is curious, however, given that the dominant prediction market with a controlling 73% of the sector’s assets, Polymarket, claims it doesn’t allow US residents.

Polymarket has gained notoriety, not for its unremarkable betting on assorted events, but for its very specific Donald Trump, Joe Biden, and Kamala Harris-related markets. Indeed, election wagers on the platform exceeded $1 billion in July alone.

Bloomberg reports US use of Polymarket

Polymarket assures the world that it’s based in the tax haven of Panama and its website ostensibly prohibits US residents.

Indeed, its Terms of Service plain text webpage states that Polymarket betting markets “ARE NOT OFFERED TO PERSONS OR ENTITIES WHO RESIDE IN, ARE CITIZENS OF, ARE LOCATED IN, ARE INCORPORATED IN, OR HAVE A REGISTERED OFFICE IN THE UNITED STATES OF AMERICA.”

Statements like this are nothing new. Many offshore crypto markets have falsely claimed to deny access to US residents. For example, BitMEX, FTX, Binance.com, Poloniex, and numerous other exchanges have previously admitted to government officials that they knowingly served US residents while claiming to block the country.

Likewise, according to Bloomberg, many US residents are indeed using Polymarket. “They asked not to be identified for fear of crimping their income from the platform,” reporters explained.

Moreover, the company’s ads have been photographed around Manhattan and the Republican National Convention. Peter Thiel and other Americans contributed to Polymarket’s fundraising.

Countless posts from US residents about their disallowed Polymarket bets are also visible on all major social media platforms.

Read more: We read the 230-page investigation into FTX so you don’t have to

For its part, Polymarket insists that it is diligently banning US users and enforcing any IP or geolocation thwarting attempts.

No matter, the growth of the prediction market industry continues and, as usual, it’s peaking during the election cycle. If history is any guide, governments will craftily shutter them before they become too much of a political nuisance.

For now, Polymarket is under court’s orders and has promised the Commodity Futures Trading Commission that it will never allow US residents to wager using its platform.

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A judge has ordered both FTX and its sister trading firm Alameda Research to pay out $12.7 billion to creditors following the conclusion of a Commodity Futures Trading Commission (CFTC) lawsuit.

In an August 7 filing, New York district judge Peter Castel ruled that both collapsed crypto firms should pay a disgorgement of $8.7 billion to the victims who lost out, and $4 billion to cover the profits they made during all of their violations. 

Defendants, including FTX, Alameda, Caroline Ellison, Sam Bankman-Fried, Gary Wang, and any of their affiliates, are, according to yesterday’s consent order, also prohibited from trading any digital asset commodities, including, bitcoin, ether, and tether. They are also banned from acting as market intermediaries.

Read more: FTX-claims broker embezzled millions to spend on jewelry, art, and luxury hotels

FTX and Alameda had both agreed with the CFTC back in July to pay the billion-dollar settlement. However, this agreement was subject to yesterday’s court verdict.

It marks the end of a 20-month-long lawsuit from the CFTC that was filed in December 2022.

FTX collapsed and declared bankruptcy in November of that year after it was discovered to have misappropriated billions of dollars of funds. Its former CEO, Bankman-Fried, was sentenced to 25 years in prison this year for charges including wire fraud, conspiracy to commit fraud, and money laundering conspiracy.

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Jump Crypto has fallen from grace. Despite its best efforts to distance itself from Sam Bankman-Fried following the spectacular collapse of FTX, Jump had unfortunate ties to his fraudulent empire that the CFTC might now be investigating.

As Michael Lewis documented in his book Going Infinite, Jump was one the largest market-makers on FTX and lost at least $300 million during its collapse. The firm, along with FTX Founder Sam Bankman-Fried, supported Solana and in the most expensive private bail-out in crypto history, funded Solana‘s then-largest interblockchain asset bridge, Wormhole.

Fortune reported on June 20 that the US Commodity Futures Trading Commission (CFTC) is investigating Jump, but didn’t provide details about the nature of its inquiries. On June 24, Bloomberg reported that Jump president Kanav Kariya stepped down.

The CFTC hasn’t sued Jump nor commented on its investigation and it’s important to remember that the existence of an investigation isn’t an indication of guilt or wrongdoing.

However, FTX’s support of Jump — and the CFTC’s investigation — is only a small part of the trading giant’s backstory. Indeed, Jump has many questionable backers.

Shady supporters of crypto‘s quant trading giant

For example, a vocal supporter of Jump was Do Kwon, the founder of Terra Luna which was once worth $29 billion but is now worthless. Kwon fawned over Jump’s president, Kanav Kariya, calling him a ‘bro‘ and ‘wunderkind.’

Kariya even served as a member of the Terra Luna Foundation Guard’s governing council.

Later, the Securities and Exchange Commission (SEC) explained how Kwon defrauded investors, and a jury agreed that he committed civil fraud. Kwon must pay more than $200 million as a result, and Terraform must pay $4.3 billion — likely more than it possesses.

Worse, the world learned during that SEC lawsuit that Jump was intimately involved in the operations of Terra (UST), Kwon‘s so-called algorithmic stablecoin. Far from algorithmic in actual practice, Jump manually traded and pumped money in to support Terra‘s price on several occasions.

Read more: How Jump helped US Robinhood users trade offshore at FTX

Su Zhu was also a Jump supporter and praised it for being diamond-handed and pro-crypto with a track record of ‘minimal balance sheet aggression’ and trading domination.

Authorities sent Zhu to prison in Singapore late last year and his fund, Three Arrows Capital, has since become a poster child of failed crypto hedge funds.

Jump also finds support among Asymmetric investors. Solana co-founders, Anatoly Yakovenko and Raj Gokal are limited partners in Asymmetric, Joe McCann’s $1 billion crypto hedge fund. McCann praises Jump’s efforts as bullish investment considerations for Solana, which he holds in Asymmetric.

For example, he praised Jump’s custom hardware and code build for Solana’s second-biggest validator software client.

Other limited partners in Asymmetric read like a leaderboard of embarrassing crypto fund managers: FTX itself, Tiger Global founder Scott Schleifer, and Multicoin Capital’s Kyle Samani and Tushar Jain.

• FTX is the most spectacular exchange collapse in crypto history. Its executives stole customer deposits and recklessly used those funds to trade on tiny altcoins like MobileCoin and FTT. Via plea or conviction, four FTX executives are guilty of 21 combined criminal counts.
• Tiger Global is most famous for losing 56% of its multi-billion dollar fund within one year. Needless to say, multi-billion dollar funds managing retirements, pensions, and endowments aren’t supposed to do that. Schleifer was in charge of Tiger’s VC fund which lost over $30 billion in 12 months.
• Multicoin Capital is also famous for one thing: helping VCs dump cheap Solana tokens onto retail bagholders.

Read more: Did Jump Crypto cause Solana stablecoin volume to collapse?

Multicoin was also the fund through which All-In Podcast members like David Sacks were able to sell rights to Solana (SOL) allocations during its pre-FTX bubble in 2021. When Sacks laughed on-air about selling millions of dollars worth of Solana exposure alongside fellow VC Chamath Palihapitiya, their privileged laughter became a global meme for how billionaires dump crypto bags on retail believers.

At the time, everyone knew SOL was a ‘Sam coin,’ a darling of Bankman-Fried who would later earn a 25-year prison sentence for his crimes.

VCs like Sacks and Palihapitiya had acquired SOL exposure via Multicoin for under $0.25 apiece. They laughed about selling at prices before their show aired on October 8, 2021, when SOL was trading above $155. 

Sacks invested in Multicoin Capital’s first fundraise. He and his funds at Kraft allegedly made a $1 billion profit thanks to Multicoin’s early allocation of SOL. 

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A US court has ordered crypto exchange Binance and its former chief Changpeng Zhao (CZ) to pay $2.7 billion and $150 million respectively to the Commodity Futures Trading Commission (CFTC).

The CFTC announced on Monday that the US District Court for the Northern District of Illinois approved the historic settlement, which was first reached in November as part of a larger package with the Department of Justice (DoJ), CFTC, and two bureaus of the US Treasury.

By formalizing the settlement, the US court has found that Binance and CZ violated the Commodity Exchange Act (CEA) and CFTC regulations. Binance will disgorge $1.35 billion in “ill-gotten transaction fees” and also pay a $1.35 billion penalty to the CFTC. CZ will personally pay a $150 million civil monetary penalty.

Read more: This one sentence from CZ’s criminal settlement has raised eyebrows

In November, CZ was forced to resign as chief of Binance as part of a plea deal. He pled guilty to breaking US anti-money laundering and sanctions laws.

Binance was found to have withheld over 100,000 suspicious transactions with organizations flagged by the US as terrorist groups, along with transactions with sites selling child pornography and sexual abuse.

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A senior commissioner at the Commodity Futures Trading Commission (CFTC) stated that it’s unlikely we’ll see a penalty brought against a crypto firm that can exceed the $4.3 billion in fines that Binance agreed to pay.

CFTC commissioner Kristin Johnson told the audience at a recent crypto summit that she hopes the landmark case against Binance “will really be a bit of a cautionary tale.” The commissioner added that Binance’s penalties established “guardrails” to bring “order and structure” to the market, Reuters reports.

“My hope would be that we have seen a spike, and what we will see going forward is that these early cases will really be a bit of a cautionary tale for those firms that really do want to successfully operate in this ecosystem,” Johnson said.

At the same summit, Johnson added that Binance’s penalties were “heightened” because the crypto exchange had been warned plenty of times before that it must comply with regulations.

Read more: Top Binance exec Noah Perlman’s ties to Epstein, Moonstone, and Gemini

The commissioner added that the settlement of the case “did not involve any allegation of fraud or similar misconduct.” These sentiments are echoed by Binance chief Changpeng Zhao, who controversially posted that “in our resolutions with US agencies they do not allege that Binance misappropriated any user funds, and do not allege that Binance engaged in any market manipulation.”

That said, Johnson added that the CFTC is “deep and careful” in its preparation before deciding civil penalties. Binance’s penalties were mostly heightened because the CFTC has publicly reiterated several times that it needs to comply, and it still failed to.

Binance’s $4.3 billion penalty marked the largest settlement to be reached with a crypto firm, and simultaneously settled several cases with other US agencies. However, it didn’t get rid of the Securities and Exchange Commission’s (SEC) lawsuit against Binance, which claims that the exchange and CZ engaged in massive wash-trading.

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The Commodities and Futures Trading Commission (CFTC) has released its annual report for 2023, detailing a record number of enforcement actions this year — 50% of which involved crypto or digital assets.

Released on Tuesday, the CFTC’s annual results for fiscal year 2023 outlined several high-profile cases that have reverberated through the crypto industry. Charges brought against Sam Bankman-Fried, FTX, Alameda Research, and his co-conspirators received first mention in the report, followed by its case against Binance and its founder, Changpeng Zhao.

This year’s “litigation victories,” as the CFTC puts it, featured several more crypto cases. July’s complaints against Celsius and its chief exec Alex Mashinsky made the honor roll, along with charges against Avraham Eisenberg and a first-of-its-kind enforcement against Ooki DAO. Not to mention a whopping $1.7 billion civil monetary penalty (CVM) against Mirror Trading International, marking the highest CVM to ever be ordered by the CFTC.

CFTC breaks its enforcement ceiling with crypto crimes

In 2023, the CFTC managed to wrangle over $4.3 billion in penalties, restitution, and disgorgement from firms and individuals. This money stemmed from 96 enforcement actions throughout the year — its highest number to date. Of those 96 cases, 47 involved digital asset commodities.

This is in sharp contrast to the 18 crypto-related cases it brought in 2022, according to last year’s annual report, out of 82 enforcement actions overall. In total, the CFTC has increased the amount of money charged by an impressive 72%, up from $2.5 billion in penalties, restitution, and disgorgement last year.

The commission’s notable increase in crypto enforcement actions follows a promise made in February by its chief Rostin Behnam. On the back of securing increased funding for 2023, the CFTC chairman said that it would use “the full breadth of the commission’s authority” to go after crypto crime this year. It appears to have delivered on that promise — and has requested an increase of $43 million for 2024 to further tackle crypto and other financial crimes.

Read more: Binance US could be shut down even with CFTC settlement

Also of note in 2023’s annual report is the CFTC’s whistleblower program, which it increasingly relies upon to combat crypto and digital asset fraud. The commission granted $16 million to “individuals who voluntarily provided original information that led to successful enforcement actions,” according to its report. To be eligible for an award, a whistleblower must provide new information that leads to enforcement action resulting in at least $1 million.

While it’s unclear how much money whistleblowers’ information brought in this fiscal year, the CFTC’s separate whistleblower annual report noted that it received a record 1,560 tips this year — the majority of which were crypto and digital asset related. The CFTC further noted in its latest report that since the program’s inception in 2010, it has now ordered over $3 billion in sanctions in “all whistblower-related enforcement actions.”

The CFTC’s annual reports are likely to continue highlighting digital asset fraud in the upcoming years, but it may soon be sharing the spotlight. The commission noted that two new task forces were formed this fiscal year — one to address emerging cybersecurity threats like artificial intelligence and another to tackle environment fraud in derivatives and spot markets.

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In his first interview after FTX crashed in November, Binance chief Changpeng Zhao (CZ) insisted that Binance is a clean exchange — that it matches trades but doesn’t trade futures or act like a trading shop.

“We are a very clean and very simple business,” CZ said in an ask me anything (AMA) Twitter Spaces on November 15 — just a day after FTX fell. “We also don’t do futures trading ourselves. We don’t have a pawn-trading firm. So we aren’t trying to make money from trading ourselves…

“Lastly, we do have market makers and rely very heavily on third-party market-makers that provide liquidity,” he said. “There is one market-maker which I’m an investor and shareholder of, and that liquidity provider doesn’t make profits. So we try to just not lose money, so they just provide liquidity in the market and aren’t profit-driven.”

During the same interview, CZ admitted that one of Binance’s auditors was also an auditor for FTX, but didn’t mention the name. The FTX auditors who vetted its proof of reserves was Armanino LLP, but since the FTX implosion it has stopped offering crypto exchanges its vetting services.

However, yesterday’s complaint filed by the US Commodity Futures Trading Commission (CFTC) against Binance, CZ, and chief compliance officer, Samuel Lim, suggests that the firm most definitely is a trading shop. According to the suit filed in Chicago federal court, Binance has its own unregistered trading operation through its “quant desk.” 

Read more: Multi-million dollar transfers to CZ firms confused Catherine Coley

The CFTC says Binance traded on its own platform with 300 accounts which were all linked to CZ, and with US-based trading firms Merit Peak and Sigma Chain. CZ also traded with his own two personal accounts while Merit Peak entered into OTC transactions with Binance’s clients. Sigma Chain traded derivatives. Binance never disclosed it was trading its own markets against its own clients.

Additionally, the CFTC alleges that Binance and CZ routinely offered illegal derivatives and failed to uphold adequate know-your-customer (KYC) and anti-money laundering (AML) checks for US customers. The commission sources messages sent by top executives at the firm as acknowledgement that decision makers were more than aware of its shady operations – they were actively encouraging it.

CZ says CFTC suit is nonsense — but it could force Binance US to shutter

CZ hit back at the CFTC’s claims. In a Binance blog post published the same day as the commission’s complaint, he said “Binance.com does not trade for profit or “manipulate” the market under any circumstances.”

While CZ admitted that Binance “trades” in a number of situations, they are all necessary business activities intended to convert crypto revenues into fiat to cover expenses, or “trading” with affiliates that provide liquidity for less liquid pairs, he claimed.

“These affiliates are monitored specifically not to have large profits,” the statement read.

CZ went on to say that employees aren’t allowed to trade in futures, including himself. “I also never participated in Binance Launchpad, Earn, Margin, or Futures,” he wrote.

Additionally, the CFTC’s claims that Binance failed to implement proper KYC and AML checks were dismissed by CZ. “We block US users by nationality (KYC), IP (including commonly used VPN endpoints outside of the US), mobile carrier, device fingerprints, bank deposits and withdrawals, blockchain deposits and withdrawals, credit card bin numbers, and more.

“We are aware of no other company using systems more comprehensive or more effective than Binance.”

Read more: Chinese users bypassed Binance KYC thanks to help from Binance

A Binance spokesperson told Protos, “We have made significant investments over the past two years to ensure we do not have US users active on our platform. During that period, we went from approximately 100 people in our compliance team to around 750 core and supporting compliance personnel today, including almost 80 personnel with prior law enforcement or regulatory agency experience and approximately 260 personnel with professional certificates in compliance.”

However, the CFTC is far from the only entity to claim that Binance has encouraged users to bypass KYC and AML checks. A report by the CNBC published last week shows strong evidence that users in mainland China were told by Binance employees to use VPNs to register as if they were in Taiwan. They were specifically told to not use VPNs originating from the US, Singapore, or Hong Kong, since Binance restricts users from those countries.

In July 2022, a Reuters report suggested that Binance swerved US sanctions by serving Iran-based users. It provided evidence showing that top execs were aware of the loophole and even bragged about it internally.

According to a report by broker Bernstein, Binance US currently makes up less than 5% of the exchange’s global operations. However, the CFTC suit cites an internal financial reporting package that claims Binance US contributes 16% of Binance’s trading revenue.

If the CFTC’s claims are proved in federal court, the commission couldn’t bring criminal charges against CZ. However, it does have the power to slap Binance with hefty fines and penalties, or shut down Binance US altogether in a settlement. According to Bernstein, this wouldn’t have a significant impact on crypto markets since it’s not material to the overall revenues of Binance.

But the same can’t be said for its impact on Binance’s survival. This is far from the only regulatory scrutiny the exchange is facing — both in the US and globally. Shutting down the largest crypto exchange’s foothold in the US could have trickle down effects on regulatory scrutiny in other jurisdictions. And the more CZ denies a growing mountain of rather striking allegations, the harder it becomes to believe they don’t have merit.

Quotes in bold are our emphasis. For more informed news, follow us on Twitter, Instagram, and Google News or subscribe to our YouTube channel.

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The Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance chief Changpeng Zhao (CZ), Binance, and Samuel Lim, alleging serious compliance breaches including failure to register, allowing US persons to trade products they shouldn’t be able to, KYC and AML failures, and offering illegal derivatives.

Specifically, the CFTC alleges that Binance deliberately attracted and maintained relationships with US customers despite prohibitions.

A Binance spokesperson told Protos, “This filing is unexpected and disappointing as we have been working collaboratively with the CFTC for more than two years. Nevertheless, we intend to continue to collaborate with regulators in the US and around the world. The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.”

Binance trading on Binance

The CFTC alleges that Zhao is the owner of over 300 separate Binance accounts which trade on the platform, including some controlled by entities he owns like Merit Peak Limited and Sigma Chain AG. Merit Peak was implicated in irregular transfers from Binance US to Binance. Zhao also had two personal accounts that he used to trade on the platform.

Merit Peak was also responsible for entering into OTC trades with customers. The lawsuit also alleges that at multiple periods Binance was the sole seller of Binance Options.

The lawsuit further alleges that Binance runs a ‘quant desk’ which directs its proprietary trading.

Furthermore, the CFTC alleges that these more than 300 accounts have been exempted from anti-fraud and anti-manipulation surveillance and have been exempted from the Binance ‘insider trading’ policy.

Cory Klippsten, CEO of Swan Bitcoin told Protos: “Rumors have been rampant for years about Changpeng Zhao trading against his customers on his Binance exchange. Today with the CFTC action detailing their charges, we’re one step closer to reining in one of the most rampant and obvious patterns of abuse in the crypto ecosystem.”

Binance in the US

Binance employs at least 60 people in the United States according to the lawsuit. These include employees working in Binance’s investment firm Binance Labs, employees working on their wallets, compliance professionals, and the company’s chief strategy officer, Patrick Hillman.

Binance recruited volunteers in the US who it referred to as ‘Angels’ to interact with US-based customers.

Read more: NatWest also limits UK crypto purchases, Binance halts GBP operations

An internal financial reporting package described in the lawsuit discussed how 16% of Binance trading revenue came from customers in the US.

The lawsuit further alleges that for the first two years of its existence, the firm took no steps to prevent US customers from trading on the platform, and even when it started restricting access in 2019, it maintained no-KYC access provided users didn’t withdraw more than two bitcoin.

At one point in 2018, after acknowledging to his team that the company served traders in the USA, Lim insisted, “there is no f’king way in hell I am signing off as the CCO for the OFAC shit.”

Later in 2019, Binance US was announced and a pop-up began greeting users connecting from a US-based IP address. However, users could still self-certify they were not a US citizen.

Also in 2019, Binance Academy contained ‘A beginner’s Guide to VPNs’ which explained to users and prospective users of Binance how VPNs can be used to ‘unlock sites that are restricted in your country.’ Zhao himself has previously tweeted, “VPNs is a necessity, not optional.” Lim also once explained to a colleague, “They can use VPN but we are not supposed to tell them that.”

In October 2020, Lim tried to describe different US regulatory agencies and their potential consequences to a colleague saying, “US users = CFTC = civil case can pay fine and settle” and continuing “no KYC = BSA act = criminal case, have to go jail.”

Furthermore, Zhao personally directed employees at Binance to change some users who were flagged as being located in the US to ‘UNKWN’ in order to obscure the portion of Binance revenue that came from the United States.

This was a known practice internally for Binance with its director of operations at one point saying, “The keyword US for internal information is also a sensitive word, so you have to use Unknow [sic] to mark the country.”

Binance allowed several brokers to use the platform to trade and made no steps to prevent those brokers from effectively offering access to Binance to people in restricted jurisdictions, including trading firms and individuals in the US.

One of these, identified as ‘Trading Firm B,’ once accidentally connected from a US-based IP and so allegedly moved all their trading activity to the account of an individual at the firm who opened up a personal account until the firm was able to set up a new offshore entity.

A Binance spokesperson told Protos, “We have made significant investments over the past two years to ensure we do not have US users active on our platform. During that period, we went from approximately 100 people in our compliance team to around 750 core and supporting compliance personnel today, including almost 80 personnel with prior law enforcement or regulatory agency experience and approximately 260 personnel with professional certificates in compliance.”

KYC failures

Lim, at one point, worried that “if Binance forces mandatory KYC” then other exchanges “will be VERY VERY happy.”

Furthermore, the lawsuit alleges that Binance US is “under common ownership and control with Binance.”

Finally, in August 2021, Binance announced that all users would be required to verify their accounts. The lawsuit alleges that contrary to that representation, Binance didn’t make users verify their identity and as of February 2022, fewer than half of its users had verified their identity.

Binance’s money laundering reporting officer (MLRO) once complained to Lim that she needed “to write a fake annual MLRO report to Binance board of directors wtf.” This same MLRO once said in a chat with Lim that “I HAZ NO CONFIDENCE IN OUR GEOFENCING.”

Lim, the Chief Compliance Officer, once said, “They are here for crime” when describing certain Binance customers from Russia. The MlRO responded, “we see the bad, but we close 2 eyes.” Similarly, Lim when discussing a customer who appeared to be associated with illicit activity said, “let him know to be careful with his flow of funds, especially from darknet like Hydra. He can come back with a new account, but this current one has to go it’s tainted.”

In a separate chat, when discussing with Binance employees about offloading clients, Lim said, “Don’t need to be so strict. Offboarding = bad in CZ’s eyes.”

A Binance Spokesperson told Protos, “We have spent an additional $80,000,000 on external partners, including KYC vendors, transaction monitoring, market surveillance, and investigative tools who support our compliance programs.

“Consistent with regulatory expectations globally, we have implemented a robust ‘three lines of defense’ approach to risk and compliance, which includes, but is not limited, to:

• Ensuring mandatory KYC for all users worldwide
• Maintaining country blocks for anyone who is a resident of the US
• Blocking anyone who is identified as a US citizen regardless of where they live in the world
• Blocking for any devices using a US cellular provider
• Blocking log-ins from any US IP address
• Preventing deposits and withdrawals from US banks for credit cards”

VIPs

Binance reportedly has a VIP program for large traders which gives them reduced transaction fees and improved customer service. One special service that the company reportedly provides to its VIP customers is a warning if law enforcement asks about their account. Binance told their VIP team to make sure that they unfreeze the account 24 hours after the notification, and make sure to contact the VIP through all available means to let them know it is now unfrozen and is being investigated.

Allegedly, Binance would also willingly remove the withdrawal limit on non-KYC accounts when they are associated with ‘VIPs.’ Lim said at one point, “we always have a way for whales.” One way was allegedly encouraging US-based VIPs to submit ‘new’ documentation which would allow them to continue trading on the platform, even encouraging some firms to open up new offshore entities to aid in the process.

One Chicago-based VIP who was a ‘top 5 client’ and represented 12% of Binance volume connected through a US IP, which led to Zhao telling one of the VIP team members to, “Give them a heads-up to ensure they don’t connect from a US IP. Don’t leave anything in writing.”

Potential for other cases

The CFTC also said it was able to collect several Signal chats from Zhao’s telephone, though it’s not clear how it gained access to that. These chats are potentially useful as part of other ongoing probes of Binance and Zhao.

Read more: The deep ties between Binance, Bitzlato, and darknet market Hydra

The Western District of Washington in Seattle reportedly believed it had sufficient evidence to bring criminal charges against Zhao and Binance, but has so far been stymied by the Department of Justice.

Previous Protos Freedom of Information Act requests to the SEC regarding Binance and Binance US have been rejected citing an exemption protecting records compiled for law enforcement purposes.

Zhao has tweeted “4” today in response to this lawsuit, which he has previously said indicates: “Ignore FUD, fake news, attacks, etc.”

Quotes in bold are our emphasis. For more informed news, follow us on Twitter, Instagram, and Google News or subscribe to our YouTube channel.

Update 1:40 PM UTC, March 28: Clarified allegations in headline.

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The Commodity Futures Trading Commission (CFTC) has requested that a federal judge impose a default judgement against Ooki DAO after it failed to respond to a lawsuit that alleged it violated federal commodities laws.

Ooki DAO — formerly known as bZeroX — is a decentralized crypto lending and borrowing protocol that offers users margin trading through loaned funds in order to increase trading exposure.

The group was sued by the commission on September 22, 2022, for:

• Offering unlawful leveraged and margined commodity transactions,
• engaging in activities without registering with the CFTC as a Futures Commission Merchant,
• failing to have appropriate KYC and anti-money laundering procedures.  

However, as detailed in Wednesday’s filings, Ooki DAO failed to respond to the lawsuit before the January 10, 2023 deadline. As a result, the commission has asked the judge to rule in its favor.

Read more: Vitalik argues why DAOs should shun the corporate approach

The case proved to be particularly complicated with various legal experts arguing that a DAO can’t be treated as a single person. Instead, they reasoned that the CFTC should be required to serve the individual token holders behind the DAO.

Lawyers described how OOKI token holders may be found individually liable within the collective entity, while one CFTC commissioner claimed the lawsuit “unfairly picks winners and losers, and undermines the public interest by disincentivizing good governance in this new crypto environment.”

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