U.S. Investigations Into Binance Have Been 'Expanded'

September 20, 2021 02:00 PM
Crypto Story of the Day

Crypto Story of the Day




Crypto was broadly selling off this morning with BTC and ETH spot volumes exceeding their 30-day average. BTC Dominance was up to roughly 42% as alt-coins lead the selloff.

Crypto Story of the Day

U.S. investigations into Binance have “expanded” according to Bloomberg, with authorities now examining “insider trading and market manipulation.” Along with Binance, U.S. exchanges are also facing regulatory pressure following SEC Chairman Gary Gensler’s Senate testimony.

As part of the investigation into Binance, the CFTC has been probing whether Binance or its staff “profited by taking advantage” of the platform's users, according to “people with knowledge of the matter” cited by Bloomberg. 

Concretely, authorities are questioning whether Binance traded on customers’ orders before executing them. The investigation has also included asking witnesses about the location of Binance’s data servers. Bloomberg notes that the line of questioning could be tied to jurisdictional questions related to the ability of the CFTC to exert authority over the venue. 

The investigation is being headed out of Chicago and includes officials involved in the case against BitMEX. 

Bloomberg has previously reported on U.S. investigations into Binance. The outlet first reported on the topic in March. According to reporting at the time, the CFTC was investigating allegations that Binance had allowed U.S. residents to trade products that violated local rules. In May, Bloomberg wrote that the investigation also included the U.S. Department of Justice and IRS probing alleged money laundering and tax offenses. 

Binance hasn’t officially been accused of wrongdoing and the investigation may not lead to charges, notes Bloomberg. 

Beyond the reported U.S.-based investigations, Binance has come under increasing pressure by global regulators, as well. Over the past several months, a slew of financial authorities have issued warnings regarding Binance. These include the UK’s Financial Conduct Authority issuing a “Consumer warning on Binance Markets Limited and the Binance Group” in June. Most recently, Binance restricted a number of its services in Singapore after the country’s financial authorities warned the venue could be breaking local laws by offering services to local residents without the proper licenses. 

During testimony before the Senate last week, SEC Chairman Gary Gensler introduced new regulatory pressure for U.S. exchanges by calling on “platforms and projects” to “come and talk with [the SEC]” because venues are highly likely to be offering coins that qualify as securities. Gensler has previously asserted, as has Chairman Jay Clayton before him, that many cryptocurrencies are unregistered securities. Coinbase also revealed earlier this month that the SEC had threatened to sue the exchange over its Lend product. 

Finally, last week following the Senate hearing, Gensler told crypto news outlet The Block that staking may likely fall under the scope of U.S. securities laws. Kraken and Coinbase both currently offer Ethereum staking services, offering users yields in return.

Regulatory efforts against Binance have been public knowledge for months and, to an extent, part of an ongoing effort by U.S. regulators to target unlicensed, often foreign, crypto derivative venues. Compliance challenges were perceived to be greatest with off-shore exchanges avoiding U.S. residents in order to bypass U.S. regulation. 

That said, Gensler’s recent remarks suggest U.S.-based venues— which have, to varying degrees, embraced local compliance— also face a range of regulatory challenges which some may have previously overlooked and exclusively associated with off-shore exchanges.

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