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Op-ed: Binance’s reputation at risk as CFTC allegations raise concerns

Op-ed: Binance’s reputation at risk as CFTC allegations raise concerns

The U.S. Commodity Futures Trading Commission (CFTC) has sued Binance, the world’s largest cryptocurrency exchange, and its CEO, Changpeng Zhao (CZ), for allegedly violating federal law by allowing Americans to trade crypto derivatives on its platform.

The CFTC has been investigating Binance since 2021 on allegations that the exchange allowed U.S. residents to use its platform to buy and sell crypto derivatives, which require registration with the CFTC under current laws. The lawsuit alleges that Binance solicited U.S. users for millions in revenue, violating federal law. CFTC has also sued Binance for operating without being registered with the agency and without proper know-your-customer procedures.

The lawsuit also claims that Binance traded against its customers, taking advantage of inside information and manipulating markets to increase profits. Additionally, Binance’s former chief compliance officer, Samuel Lim, was charged with aiding and abetting the company’s violations. This is a severe breach of trust if this is true. The accusation of Binance trading against its users is particularly troubling. If true, this would be a betrayal of trust and a violation of the principles of fair trading.

Impact on Binance

As a cryptocurrency exchange, Binance should be a neutral platform that facilitates trading between buyers and sellers, not one that takes advantage of its users. If found guilty by the CFTC, it could face significant penalties and consequences. The CFTC can impose fines, seek injunctions, and even ban individuals or companies from participating in commodity markets. Binance could also face civil lawsuits from affected users or investors.

Additionally, Binance’s reputation could be severely impacted if found guilty of the CFTC’s charges. Trust is essential in the cryptocurrency market, and if Binance is seen as a bad actor that trades against its users, it could result in a loss of confidence from its clients and investors. It could affect Binance’s ability to operate in the U.S. and other regulated markets, limiting its growth potential.

Impact on industry

From a broader perspective, it could harm the entire cryptocurrency industry. Binance is currently the world’s largest cryptocurrency exchange and plays a significant role in the market. A loss of confidence in Binance could lead to a decrease in overall market trust and investment. It could increase regulatory scrutiny and stricter regulations for other cryptocurrency exchanges.

Rostin Behnam, CFTC Chairman, said in a statement:

“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law,”

If I am not wrong, this is the first time CFTC has gone against a crypto exchange. The allegations by the CFTC are not to be taken lightly, and Binance should address them with transparency and accountability. It is vital to remember that these are allegations, and Binance has not been found guilty of wrongdoing.

Therefore, we should reserve judgment until all the facts have been presented in court. The consequences of being found guilty by the CFTC could be severe for Binance and its operations. It remains to be seen what the outcome of the lawsuit will be, and Binance has denied any wrongdoing and vowed to fight the charges.

It is also important to note that Binance has been scrutinized by various regulators worldwide. This is not the first time the exchange has faced accusations of regulatory violations. This raises concerns about the exchange’s compliance procedures and willingness to follow regulatory requirements.

Binance has responded to the lawsuit, stating that its priority is to continue protecting its users while working with regulators to ensure compliance. Binance has denied the allegations, stating that they have always complied with U.S. regulations and that the CFTC’s claims are without merit.

CZ had also publicly clarified on his blog:

“We are collaborative with regulators and government agencies worldwide. While we are not perfect, we hold ourselves to a high standard, often higher than what existing regulations require. And above all, we believe in doing the right thing by our users at all times. In this journey towards freedom of money, we do not expect everything to be easy. We do not shy away from challenges.”

It remains to be seen how the case will play out. Still, the CFTC is taking a strong stance on regulating cryptocurrency trading — companies like Binance must ensure they comply with all relevant laws and regulations to avoid similar legal action in the future.

The outcome of the lawsuit remains to be seen, but companies like Binance must comply with all relevant laws and regulations to avoid similar legal action in the future. Ultimately, the importance of regulatory compliance and transparency cannot be overstated. Binance’s ability to clear its name and move forward in a transparent and accountable manner will be crucial for the entire industry’s health and growth.

 

Source: https://cryptoslate.com/binance-reputation-at-risk-as-cftc-allegations-raise-concerns/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Three Arrows, Voyager failures raise questions of who is next in crypto fall from grace

Three Arrows, Voyager failures raise questions of who is next in crypto fall from grace

The crypto winter is killing off companies that took on big risks when markets were booming. So is this the shakeout all financial markets go through?

Hedge fund Three Arrows Capital (3AC) looks like the biggest casualty of the crypto price collapse so far after filing for bankruptcy in the U.S., but according to blockchain business advisor Anndy Lian, the worst may be yet to come.

“It will have a snowball effect,” said Lian, who is a fund manager for blockchain investments at Passion Venture Capital Pte. in Singapore and advises Mongolia’s government on the industry.“[The impact] will not just be on 3AC, it will be on 3AC’s involvement as an investor or as a fund manager, then it will snowball down,” Lian said in an interview with Forkast.

That snowball has already hit crypto lending platform Voyager Digital Ltd., which filed for Chapter 11 bankruptcy on Wednesday in New York. Yet as more companies get swamped, some in the industry are calling it a necessary shakeout after the excesses of last year’s record-setting crypto price surge.

Voyager Digital had earlier halted or limited customer withdrawals, a move adopted by other lenders such as BlockFi. Crypto exchange Celsius was one of the first lending and staking platforms to halt withdrawals in early June, citing the common refrain “extreme market conditions.”

The collapse of Terra, which some argue helped trigger the bankruptcies now being filed, saw its Luna token fall from the ranks of a top 10 cryptocurrency with a market capitalization of almost US$30 billion to effectively zero in a matter of days.

Broken arrow

Any firm with significant exposure to the Terra project was hit hard by the collapse, including 3AC, which had a US$200 million investment in Luna Foundation Guard, the organization behind the Terra stablecoin, effectively wiped out when the project went south.

As 3AC sank into funding trouble, Voyager got hit after disclosing it had loaned over US$650 million in the USDC stablecoin and Bitcoin to 3AC, which it might not be getting back. BlockFi was among the lenders that foreclosed on roughly US$400 million in loans to 3AC.

Chapter 11 generally allows for a company to come up with a plan to pay off creditors and rebuild the business.

In the crypto boom times, many of these companies with lending and staking platforms were venturing into ever more risky areas for profits, Igneus Terrenus, head of communications at crypto exchange Bybit, said in an interview with Forkast.

“It’s almost a repeat or like a rhyming [with] what happened with the subprime mortgage crisis (which led to the Global Financial Crisis of 2008),” he said. “These firms just have to go further and deeper into more risky area because there is so much appetite.”

One of the world’s largest investment banks, Goldman Sachs is said to be looking to raise US$2 billion to buy distressed assets from Celsius, though Goldman hasn’t commented on the speculation.

Smaller pond

Companies native to the crypto industry are also looking for opportunities, with Bahamas-based crypto exchange FTX providing a US$400 million loan to BlockFi that includes an option to buy the troubled crypto lender.

Buying these firms out is a “smart move” Terrenus said, not only as a business opportunity, but in the case of FTX it creates a positive impression of a “savior” within the industry and grants confidence back to those firms and the market in general.

While the so-called contagion spreads in the crypto industry, it hasn’t reached broader traditional markets — this time around.

In its recent Financial Stability Report, the Bank of England highlighted how vulnerabilities in the crypto market, such as over-leveraging and breakdown of confidence in stablecoins, have contributed to the crypto crash.

The BoE recommended increased regulation of the industry to minimize the risk to broader markets as crypto adoption grows and become further entwined within traditional finance.

“It happens to everybody,” he said. “The fact that it’s happening to crypto now I don’t think should come as a surprise to people. The really important thing is what the crypto industry does now that it’s happened.”

Some of these firms will have to look at strengthening their balance sheets and internal controls, Sullivan added.

Many of these firms that are in trouble at the moment are not true DeFi (decentralized finance), but traditional centralized businesses just focused on cryptocurrency, he said.

Total value locked in these protocols has decreased in the past few months, but there have not been the collapses as has been seen in more centralized firms.

“Decentralized protocols actually performed exactly how they intended to and avoided the perils that the likes of BlockFi, Celsius and Voyager are experiencing,” Sullivan said.

Original Source: https://forkast.news/three-arrows-voyager-failure-crypto-fall-from-grace/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j