The US Commodity Futures and Trading Commission (CFTC) filed a lawsuit against crytpo exchange Binance in a federal court in Chicago on Monday. The claim is that the cryptocurrency exchange along with Binance co-founder Changpeng Zhao and former chief compliance officer Samuel Lim did not abide by US regulations.
Although Americans are not allowed by the US government from trading crypto on Binance since the company is based in China, the exchange showed Americans how to be on the exchange without being caught as a VIP customer.
Binance would give VIP customers warnings to withdraw their cryptocurrency before their assets would be frozen by the US government. Up to this point, over $160 million has been frozen by law enforcement because the crypto exchange has been used for money laundering in the past.
If you own crypto or if you know anyone that has investments in crypto, then you may need to withdraw your cryptocurrency. Binance is going down the same road as FTX, the crypto exchange that crashed last year under the helm of Sam Bankman-Fried.
FTX was declared to be insolvent in November 2022. Once FTX failed, investors lost billions of dollars because they were not able to withdraw their crypto.
During the FTX collapse, Binance attempted to bail out FTX, but backed off in November. Binance backing off was clearly a sign that their crypto exchange is not as financially sound as experts are claiming because Binance did not have enough assets to cover the tab.
This lawsuit could potentially bring about another bitcoin collapse because there is no money limit on how much assets that can be frozen by the US government. The US national debt is over $31 trillion. That means that more assets from investors will be taken away from them unless investors withdraw money from their crypto wallet immediately. As a result of this lawsuit, bitcoin has dropped 2.5 percent in one day.
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