Binance, the world's largest cryptocurrency exchange, experienced a $1.6 billion crypto withdrawal since the CFTC sued the exchange, its CEO and founder, Changpeng Zhao, and its former top compliance executive, accusing them of operating an "illegal" exchange and a "sham" compliance program, Reuters reports.
According to blockchain data tracker Nansen, Binance has received $852 million in withdrawals in the last 24 hours alone. These figures represent a significant increase from the previous two weeks' average of $385 million per day.
Is Binance nearing a collapse?
While the current outflows were higher than usual, they did not exceed the $3 billion in withdrawals seen on Dec. 13, when investors became concerned about Binance's reserves.
Despite the large withdrawals, a Binance spokesperson stated on March 28 that the company would continue to "collaborate" with regulators.
What is the CFTC lawsuit about?
The lawsuit comes amid the US government's crackdown on cryptocurrency companies. In recent years, US prosecutors and civil investigators have targeted cryptocurrency firms for illegal offerings and noncompliance with anti-illicit activity rules.
However, the rate of such government activity has recently increased following the exposure of the recently failed exchange FTX.
Here's a clearer look at the CFTC lawsuit against Binance:
- Binance is accused of "willful evasion" of US law "while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit," according to the CFTC.
- Binance allegedly offered and executed commodity derivatives transactions on behalf of US citizens from at least July 2019 to the present, violating US law.
- The CFTC also accused Binance's compliance program of being "ineffective," and the company, led by Zhao, instructed employees and customers to avoid compliance controls.
The CFTC Chairman, Rostin Behnam, said in a statement that Binance executives knew for years "they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance." Firms such as brokers facilitating US customers' trading of commodities and derivatives products, including Bitcoin, must register with the CFTC.
In response, CEO Changpeng Zhao claims that Binance.com never trades for profit or "manipulate" the market. Binance "trades" in a variety of situations, and their revenues are in cryptocurrency.
"We do need to convert them from time-to-time to cover expenses in fiat or other crypto currencies. We have affiliates that provide liquidity for less liquid pairs," he notes in a statement.
A Dangerous Position for Binance
Binance's cryptocurrency BNB, the world's fourth largest by market cap, dropped around 4% after the lawsuit was announced. Despite the recent developments, Zhao advised his followers in a tweet on Monday to "ignore FUD, fake news, attacks."
It is unclear how this lawsuit will affect Binance, but the significant withdrawal of funds and the regulatory scrutiny the exchange is facing indicate that it is in a precarious position. Investors and market observers will be watching the exchange closely to see how this situation develops.
Stay posted here at Tech Times.
Related Article : Sam Bankman-Fried Faces New Criminal Charge for Bribing Chinese Officials for as much as $40M
