Binance dismissed CFTC allegations on Thursday. The company claimed that the regulator had exceeded its jurisdiction by attempting, outside of the US, to regulate foreign companies and individuals.
“It is a bedrock principle of our legal order that, as a general rule, ‘US law governs domestically but does not rule the world,'” the exchange said, citing a 15-year-old lawsuit between Microsoft and AT&T.
Additionally, “stretching the territorial reach of its jurisdiction,” Binance claims that the regulator is increasingly leaning on a mix of inconsistent legal theories according to a detailed court filing.
Binance maintains that the CFTC is advancing an unfounded theory, based on registration categories. “unsound” It is claiming a regulation previously unutilized and basing their case on accusations that are dismissed in the guidelines of the agency.
Exchange argues that the CFTC allegations do not show convincingly that any Binance foreign entity acted as a Futures Commission Merchant. Binance has argued that the CFTC’s allegations portray Binance.com more as a trading intermediary than a direct access exchange.
As self-regulatory organizations, all registered FCMs are required to join the National Futures Association. This organization enforces CFTC financial reporting and other requirements. FCMs are often subject to more stringent regulatory scrutiny due to their position as an intermediary between futures market participants and customers.
Binance argues that if required to register with CFTC it would identify itself as a Designated Contract Market or Swap Execution Facility instead of an FCM.
Binance urged the US District Court for the Northern District of Illinois dismiss the charges brought against its foreign companies and CEO Changpeng Zhao. Binance has been accused of facilitating illegal commodity derivative transactions by US residents since July 2019 by the CFTC.
Binance and its executives, including the former Chief Compliance officer Samuel Lin, are also accused by the CFTC of intentionally violating regulations in order to hide their activities.
Binance’s parent company is registered on the Cayman Islands. However, it has refused to reveal its official base and refuses to disclose where the operation takes place.
Binance and Zhao are also accused by the SEC of operating illegally. “web of deception.” This includes, but is not limited to, failing to implement customer monitoring controls or restricting US users from using its platform.
The CFTC has not responded immediately. Binance’s spokesperson refused to make any comments on the litigation.
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