Leading cryptocurrency exchange Binance has reportedly filed for a dismissal of the charges brought against it by the U.S. CFTC. The largest crypto exchange by trade volume cited a lack of jurisdiction, saying that the regulators acted outside its powers.
In a June 27 court filing, Binance asserted that the charges should be dismissed because the Commodities Futures Trading Commission (CFTC) failed to argue that the Foreign Binance Entities and its CEO are subject to personal jurisdiction.
Recall that on March 27, the CFTC charged Binance and its CEO for allegedly willfully evading federal laws and also operating an “illegal” derivative exchange. Binance responded to the charges four months later claiming that the Commission sought to regulate corporations and foreign individuals that operate and reside outside the United States.
Binance CEO Changpeng ‘CZ’ Zhao is a Canadian citizen and its holding company is located in the Cayman Islands.
The exchange further argued that the CFTC failed to distinguish between the various Binance entities, rather it chose to charge them together regardless of their separate roles.
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The filing also pointed out that the regulators referred to all the entities as “Binance” even though the defendants include Binance Holdings Limited, Binance Holdings (IE) Limited, and Binance (Services) Holdings Limited.
In the lawsuit, the CFTC accused Binance of offering and executing “commodity derivatives transactions” to persons residing in the United States from July 2019 through the present. It also alleged that Zhao had directed his employees and users to “circumvent compliance controls” with the aim of maximizing corporate profits.
Responding to this, Binance argued that by June 2019, the company had already started implementing steps to off-board potential U.S. customers and to make sure that no new users were from the United States.
“By June 2019, Binance.com began implementing steps to restrict and off-board potential U.S. users and ensure that new users were not U.S. persons.”
Furthermore, Binance stressed that before July 2019, Binance.com did not offer the alleged digital asset derivative products, asserting that it began to restrict U.S. users.
Ultimately, Binance urged the court to dismiss the case entirely citing that the Commodities Futures Trading Commission (CFTC) failed to “establish jurisdiction over the defendants, fail to establish that the CFTC can enforce the provisions cited in the complaint extraterritorially, and fail to plead essential elements of its claims.”
While Binance has continued to face regulatory scrutiny globally, it has managed to generate some recent positive news when it announced that it will resume its full operations in Japan by August after successfully acquiring Sakura Exchange BitCoin (SEBC) in November 2022.