Semafor The US Department of Justice is considering fraud charges against Binance, but is concerned about a FTX-style run in the market.

The US DOJ may charge Binance with fraud, but worries about a market panic like FTX.

Source: Semafor

Translation: LianGuaiBitpushNews Mary Liu

According to informed sources, officials from the U.S. Department of Justice are considering bringing fraud charges against the cryptocurrency exchange Binance, but they are concerned about the potential “stampede effect” in the market.

The sources said federal prosecutors are concerned that if they sue Binance, it could lead to a run on the exchange, similar to the now-bankrupt FTX platform, resulting in consumer losses and causing panic in the cryptocurrency market.

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The sources said prosecutors are considering other options, such as fines and deferred or non-prosecution agreements. This outcome would be a compromise, holding Binance accountable for alleged criminal behavior while minimizing harm to consumers.

This debate highlights the complexity and rapid development of U.S. cryptocurrency enforcement and regulation, as companies operate in a legal gray area where consumers do not enjoy any protections offered by traditional banking systems.

The U.S. Department of Justice declined to comment. Binance did not respond to requests for comment.

Some Thoughts

In addition to the Commodity Futures Trading Commission (CFTC), Binance and its founder Changpeng Zhao have faced allegations from the U.S. Securities and Exchange Commission (SEC). The SEC alleges that Zhao and his company operated an unregistered exchange in the U.S. and intentionally allowed U.S. citizens to participate in Binance’s offshore exchange. The SEC also alleges that Binance manipulated trading on its U.S. platform through a secret market-making company called Sigma Chain, misleading customers and investors.

Legal experts say that due to the seriousness of the allegations, the SEC’s case against Binance resembles a criminal indictment, thereby increasing the possibility of criminal charges.

It is not common for the SEC to file civil lawsuits ahead of federal prosecutors, especially in high-profile cases. The agency typically collaborates with the Department of Justice to bring both civil and criminal charges.

The media, including Reuters, has extensively reported on how Binance evades U.S. laws and regulations, leading to a criminal investigation launched by the U.S. Attorney’s Office in Seattle in 2018.

When considering whether to bring charges against large entities, the Department of Justice often needs to weigh the impact on consumers, employees, and shareholders. This has been the case since the collapse of Enron twenty years ago.

The question is, should these factors be taken into account when dealing with cryptocurrency exchanges operating in the legal gray area? Those who trade on Binance and are allegedly deceived by the company’s strategies should be aware that they are taking on greater risks than those trading on regulated exchanges.

In order to access Binance.com, U.S. citizens need to use VPN or other tools to circumvent restrictions, but it is difficult for Binance’s customers to be considered accomplices to the company’s alleged misconduct. Cryptocurrencies have now become a mainstream part of the financial system.

In fact, the Department of Justice is discussing the potential impact of the indictment on consumers, which is to some extent a recognition of the legitimacy of cryptocurrencies.

Balancing Interests

If there is enough evidence to support the charges, failing to prosecute Binance may only delay the inevitable collapse of the exchange. It could ultimately send a signal of weak attitude towards cryptocurrency exchanges in the United States, inviting more misconduct in the future.

Economist Nouriel Roubini, known for predicting the 2007-2008 housing crash, believes that the baby should be thrown out with the bathwater and describes the entire crypto ecosystem as corrupt. He said, “These participants should leave.”

U.S. Senator Elizabeth Warren has also called for further criminal investigation into Binance, as it is suspected of lying to Congress. In an open letter to Attorney General Merrick Garland, she stated, “These actions by Binance and Binance.US may violate federal laws and could subject company officials to fines and imprisonment.”

Regulatory agencies in the United States should also take responsibility, as they have created a vague and unstable regulatory environment for cryptocurrency companies operating within their jurisdiction, prompting many in the crypto industry to seek refuge in countries that welcome crypto businesses.

On the other hand, lawmakers can protect consumers by enacting new industry regulations, making the United States a more attractive place and providing consumers with safer alternatives than offshore exchanges like Binance and FTX.

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