CFTC allegations and $1 billion lawsuit for Binance: Law Decoded, March 27–April 3
Last week brought troubling news for the world’s largest crypto exchange, Binance. The United States Commodity Futures Trading Commission accused the company and its CEO, Changpeng “CZ” Zhao, of trading violations. According to the lawsuit filed by the CFTC, Binance has conducted transactions for U.S. customers without proper registration since at least 2019.
According to the CFTC, Binance obscured the location of its executive offices, using 300 “house accounts.” The Commission has also accused the platform of keeping the information a “top secret,” and alleged that the exchange refused to respond to commission-issued investigative subpoenas seeking information on its trading activity.
A day later, CZ rejected all the allegations, arguing that Binance “does not trade for profit or ‘manipulate’ the market under any circumstances.” He argued that while Binance “trades” in some situations, this is mainly to convert crypto revenue to cover expenses in fiat or other cryptocurrencies. Zhao called the recent CFTC filing both “unexpected and disappointing.”
The complaint has already triggered several major reactions for Binance. A federal judge has temporarily halted its deal to purchase Voyager Digital for $1 billion after the U.S. government requested an emergency stay. And five days after the CFTC move, a new $1 billion lawsuit was filed against the crypto exchange by the law firm representing three American investors. The plaintiffs claim that Binance was involved in trading unregistered securities and paid influencers for the unlawful promotion of the services.
MakerDAO passes new ‘constitution’ to formalize governance process
MakerDAO, the decentralized autonomous organization that governs the protocol that issues the Dai (DAI) stablecoin, has passed a new proposed “constitution” to formalize governance processes and help prevent hostile actors from taking over the protocol, according to the official forum page for the proposal.
The governing document creates several categories of participants with different powers and responsibilities. For example, constitutional conservers (CCs) have the job of “facilitating and protecting the Maker Governance process” by ensuring that other participants follow the constitution. CCs can become constitutional voter committee members or constitutional delegates.
Beaxy exchange shutters after SEC presses multiple charges against founder
Beaxy suspended operations on March 28 “due to the uncertain regulatory environment surrounding our business,” according to the cryptocurrency exchange’s blog. The suspension came a day before the United States Securities and Exchange Commission (SEC) announced it was charging Beaxy and its executives with failing to register as a national securities exchange, broker and clearing agency. The SEC also said it was charging Beaxy founder Artak Hamazaspyan and Beaxy Digital — a company he controls — with raising $8 million through an unregistered offering of the Beaxy token (BXY), and the misappropriation by Hamazaspyan of $900,000 of investor funds for personal uses.
Terra co-founder Daniel Shin’s arrest denied by the court
A local court in South Korea denied the prosecutor’s request to issue an arrest warrant for Terraform Labs co-founder Shin Hyun-Seong, also known as Daniel Shin. This was the second attempt by South Korean authorities to reign in Shin following the recent arrest of Do Kwon — Terra’s other co-founder. The Seoul Southern District Court denied the request, citing unconfirmed allegations and the unlikeliness of Shin being a flight risk or destroying evidence. Shin currently faces multiple fraud charges, specifically concerning allegedly hiding risks associated with investing in Terra’s in-house tokens.
