Key highlights
- Bitcoin fell 3% to $26,955.61 after the US Commodities Futures Trading Commission filed a lawsuit against Binance for offering unregistered crypto derivative products.
- Other cryptocurrencies, including Ether, also experienced losses, and stocks connected to cryptocurrencies, such as Microstrategy and Coinbase, declined by 10%.
- The CFTC accused Binance of breaking the law in several ways, including engaging in illegal off-exchange commodity options, failing to implement know-your-customer or anti-money laundering procedures, and having a subpar anti-evasion program.
Bitcoin temporarily declined to $26,955.61 after the U.S. Commodities Futures Trading Commission (CFTC) filed a lawsuit against Binance and its founder Changpeng Zhao, alleging that the business knew it was breaking the law by offering unregistered crypto derivatives products in the United States.
More details on the losses
Nairametrics gathered that within minutes of the revelation, the news sent tremors through the markets, sending the price of bitcoin down by roughly 3%, shedding $1k in the process.
According to data from Binance, Ether fell 3.5% to $1,704.56. Also, stocks connected to cryptocurrencies decreased, with both Microstrategy and Coinbase declining by 10%. Hut 8, Riot Platforms, and Marathon Digital, three miners, each lost roughly 8%.
BNB, the exchange token for Binance, fell as much as 6% in value from just before the news broke.
The tech-heavy Nasdaq Composite fell 0.6% because of the losses and a rise in bond yields. Future profits, such as those that growth-oriented businesses offer, become less alluring when interest rates rise.
But the losses were soon contained even as the market recovered, making up for most of the loss as the day went on.
Details of the lawsuit against Binance
The lawsuit claimed that Binance ran a derivative trading operation in the United States, offering trades for cryptocurrencies like bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT), and Binance USD (BUSD), which the suit referred to as commodities.
The lawsuit was filed on Monday in the U.S. District Court for the Northern District of Illinois. Additionally, it was claimed in the lawsuit that Zhao, the company’s CEO, instructed staff members to forge their positions on Google Maps.
The lawsuit also claimed that Zhao, the company’s head, gave orders to staff members to use virtual private networks to disguise their whereabouts.
The CFTC accuses Binance of breaking the law by engaging in “illegal off-exchange commodity options,” offering futures transactions, failing to register as a designated contract market or swap execution facility, managing its business poorly, failing to implement know-your-customer or anti-money laundering procedures, and having a subpar anti-evasion program.
The lawsuit stated that “Zhao answers to no one but himself” and added that “Binance’s reliance on a maze of business companies to administer the Binance platform is purposeful; it is meant to disguise the ownership, control, and location of the Binance platform.”
Gretchen Lowe, chief counsel for the CFTC, referred to internal emails and chats when she described Binance’s activities as “willful avoidance of U.S. law” in a press release.
In addition, the lawsuit claims Binance instructed US users to use some strategies to circumvent the company’s ban on US-based customers.
The US Securities and Exchange Commission, which has recently been more active with lawsuits, has taken a harder line against prominent participants in the cryptocurrency industry than the CFTC, which is charging Binance of selling unregistered crypto derivative products.
The CFTC’s classification of some cryptocurrencies, including Litecoin, as commodities, however, may boost sentiment in the short future.
The CFTC took enforcement action against Binance after the SEC forewarned Coinbase, the largest cryptocurrency exchange based in the US, that it would pursue enforcement action due to its bitcoin staking program.
