In a blog post on Monday, Binance CEO Changpeng Zhao said a lawsuit filed earlier in the day contained “an incomplete statement of facts”.
“We disagree with the characterization of many of the issues alleged in the complaint,” said Zhao, who also called the complaint “unexpected and disappointing.”
The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, alleges that Binance operated a derivatives trading operation in the U.S. offering trades for cryptocurrencies, including bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT) and Binance USD (BUSD), which are referred to as commodities throughout the series. The lawsuit also alleges that the company, led by Zhao, instructed its employees to spoof their locations through the use of virtual private networks.
Zhao praised the exchange giant’s compliance technology, including its know-your-customer program.
He wrote that the exchange had 750 people on its compliance teams, “many with previous backgrounds in law enforcement and regulatory agencies,” noting that the company had 16 licenses and registrations worldwide.
According to the CFTC, the exchange, which has a US subsidiary in Binance.US, has created a system to hide its true reach and operations.
In a press release, CFTC Chief Counsel Gretchen Lowe called Binance’s actions “deliberate evasion of US law,” pointing to internal chats and emails.
In addition, the lawsuit alleged, Binance has directed US clients to use various methods to circumvent restrictions for US-based clients. “Binance has instructed US customers to circumvent such controls by using [virtual privacy networks] to conceal their true location,” the lawsuit alleges.
In his blog post, Zhao highlighted Binance’s 90-day, no-day trading policy, writing that employees are “not allowed to sell any coin within 90 days of” their most recent purchases, or vice versa. “This is to prevent employees from actively acting. We also prohibit our employees from trading futures,” Zhao wrote.
Listing the CEO as a defendant, the CFTC alleges that Zhao was the “direct or indirect owner of entities engaged in proprietary trading activities on the Binance platform”, and was also the “direct or indirect owner of approximately 300 separate Binance accounts.” which engaged in prop trading on the Binance trading platform.
Zhao wrote that he has two accounts with Binance, one for his Binance Card and the other for his crypto holdings. “I eat our own dog food and keep my crypto on Binance.com,” he wrote, adding that he occasionally converted crypto to pay “for personal expenses or for the card.”
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