CFTC Investigates Binance for Possible Insider Trading – Regulation Asia


Binance reportedly has plans to become a licensed financial institution, with a centralised headquarters, to make it easier to work with regulators.

US authorities have expanded their probe into cryptocurrency exchange Binance, now examining possible insider trading and market manipulation.

Binance is the world’s largest cryptocurrency exchange, with an average daily trading volume of USD 2 billion. It runs its as-yet-unregulated global trading operations with no headquarters.

According to Bloomberg, US officials are looking into whether Binance used its knowledge of millions of customer transactions to trade on those orders before executing them, thereby exploiting its customers. The probe involves CFTC (Commodity Futures Trading Commission) investigators, who have been reaching out to potential witnesses in recent weeks.

The CFTC has been looking into whether Binance allowed US residents buy and sell derivatives linked to Bitcoin and other cryptocurrencies. Binance is not registered in the US, meaning it is prohibited from signing up US customers and offering them services to trade in derivatives, which the CFTC regulates. The regulator has sought internal Binance data and communications that could indicate the firm may have tried to sign up US customers.

The investigation reportedly includes some of the same officials who worked on the CFTC’s case against BitMEX, which last month agreed to pay USD 100 million to resolve claims that it allowed US residents trade derivatives and lacked proper AML controls.

Separately, the US DOJ (Department of Justice) and IRS (Internal Revenue Service) have had criminal probes underway for months seeking to determine whether Binance has facilitated money laundering and tax evasion.

Binance says it has a “zero-tolerance” policy for insider trading and a “strict ethical code” to prevent any misconduct that could hurt its customers or the crypto industry.

The SCMP has meanwhile reported that Binance CEO Zhao Changpeng plans for the exchange to become a licensed financial institution, with a centralised headquarters, to appease regulators.

“As we run a centralised exchange, we have come to realise that we need to have a centralised entity to work well with regulators,” Zhao said. “We need to have clear records of stakeholders’ ownership, transparency and risk controls.”

“As the largest player in the industry, we need to prepare ourselves for the shift. We are making changes to make it easier to work with regulators,” he added.

In recent months, Binance has faced regulatory scrutiny in the UK, Hong Kong, Japan, Singapore, Malaysia, Thailand, India, Germany, Italy, Netherlands, South Africa and Cayman Islands.

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