Messaging History Is Damaging in the CFTC Lawsuit Against the Former CCO of Binance

Crypto companies can rely on the credibility provided by a seasoned and powerful CCO to fight off the increased regulatory scrutiny of the previous year. Investigators are examining these companies’ compliance policies and processes to make sure they adhere to all necessary regulations. So doing this might entail getting rid of the subject that is on one’s return.

The opposite is also true: If a CCO turns out to be not taking their duties carefully, their company may come under greater government scrutiny. The biggest exchange for digital currencies in the world, Binance, is currently experiencing such a predicament as a result of accusations made by the Commodity Futures Trading Commission (CFTC).

The CFTC has charged Cayman Islands-based Binance and its creator with running an unauthorized exchange for electronic asset swaps while taking orders from Americans starting in July 2019 and continuing to the present. The CFTC disputes Binance’s claim that it prevents all consumers from the United States from using its platform.

Charges of helping to promote the alleged misbehavior of the corporation were also made against Samuel Lim, the former CCO of Binance, in the agency’s complaint.

Lim “promot[ed] the use of ‘creative means’ to assist customers in circumventing Binance’s compliance controls,” according to a CFTC press release. In accordance to the FBI, he said that the corporation made a “biz decision” to prioritize financial achievement over compliance with American law.

The CFTC supported its accusations with internal messages from Lim, using these examples:

Virtual private networks (VPNs) can be used by US clients for reaching the site,

“but we are not supposed to let them know that. We are not the source of it. However, we can always ask our friends or other parties to post haha.”

Regarding acknowledged weaknesses in knowing your customer (KYC) protocols,

“[competing digital asset exchanges] will be VERY VERY happy if Binance forces mandatory KYC.”

Concerning clients stated of employing the website for enabling illegal activities: “‘Like come on. They are here to commit crimes.”

When it comes to if a client figured to be carrying out criminal activity ought to be offboarded: “‘He can come back with a new account. But this current one has to go, it’s tainted.’”

The compliance culture of the company is “‘Email sending and no action.'”

The CFTC further asserted that Lim knew that US regulatory and legal requirements applied to Binance as early as 2018, and that it was “‘pain in the [butt] but its [sic] my duty'” to notify the platform’s leader of sanctions regulates and that there was “‘no… way in hell I am signing off as the cco'” for complying with OFAC (Office of Foreign Assets Control) requirements.

Whenever your CCO refers to their work as a “pain in the butt,” that raises a warning sign. When they openly promote breaching the law, it casts doubt on the reliability of your entire business.

According to the CFTC, Lim, who is thought to be headquartered in Singapore, joined Binance in April 2018 and served as the company’s first CCO until January 2022. He was put away from work sometime in or around May 2022, although the agency also stated that he is still employed by the business.

Binance has made a number of announcements in the past year to strengthen its compliance procedures. In September, it hired Steven Christie, the former senior vice president of compliance at competitor Kraken, and in February, it appointed Noah Perlman, the former chief operating officer of Gemini, as its global chief compliance officer. The business claims to employ 750 core and auxiliary compliance personnel.

All of it, however, is now in jeopardy due to allegations made against Lim, the business’s first CCO. His predecessors will have a difficult time changing the company’s image by putting up a “mere façade of compliance,” in the words of CFTC Commissioner Kristin Johnson.

Information from Compliance Week

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