Expert does not rule out criminal proceedings against Binance in light of the CFTC suit

Beyond the civil suit by the CFTC against the cryptocurrency exchange Binance and its chief Changpeng Zhao, criminal proceedings could be opened if signs of a crime are found in the actions of officials or the company. ForkLog quoted lawyer Stanislav Boris.

According to him, violations described in the civil proceedings are often closely linked to breaches of criminal law and could lead to such charges.

“If criminal prosecution begins, it is possible that prosecutors may ask the court to suspend the civil proceedings until the parallel criminal investigation is completed. Such a development would significantly complicate Binance’s legal defence as well as its operations, in principle,” he said.

At this stage, the CFTC’s suit is already a powerful reputational blow to the crypto industry. In particular, Boris mentioned the withdrawal of 3611 BTC from Binance (about $100 million at the time of the transaction) within a day of the charges being brought. He did not rule out that similar operations could potentially become the subject of an investigation if law enforcement authorities view them as an attempt to conceal illicit funds.

In the long run, the impact of the proceedings will hinge on the outcome. If the suit is dismissed, the crypto market would gain impetus for more detailed regulation and the closing of regulatory gaps.

“If the suit is proven, Binance will lose part of its U.S. market and will likely suspend derivatives trading until regulatory rules are introduced or a workaround to provide the service is created,” Boris says.

He also noted that even after a favourable civil ruling, a repeated violation of the same kind would carry far more serious consequences for the exchange.

Indefibank CEO Sergey Mendeleev pointed out that the CFTC’s suit classifies popular cryptocurrencies such as Bitcoin and Ethereum as commodities, whereas the SEC, in its lawsuits, asserts that they are securities.

“Such legal dualism in the approach of American regulators already hints at the fragility of positions, but the outcome will be decided by the courts, and the proceedings are likely to be long and interesting, leaving the core of the accusations outside the frame,” he noted.

Mendeleev believes that Binance, with its powerful team of lawyers and expert advisers, will be able to fend off the CFTC’s suit.

“I won’t say there won’t be a more threatening suit from the SEC. But, probably, in line with good American tradition, it will end in a settlement where Binance pays a paltry fine and agrees to additional restrictions for U.S. customers in its trading. In that case, the question of what Ethereum is—a commodity or a security—will remain open,” explained Mendeleev.

Yulia Privalova, director of the Legal Department at the Digital Rights Center, believes the CFTC will not allow an unconditional victory for Binance, to avoid undermining its reputation. Nevertheless, the exchange has a strong chance of reducing penalties and challenging some episodes.

“The suit contains quotes from secret Signal chats with quite shocking facts that will surely be challenged. In particular, the messages that Binance’s customer support allegedly “teaches people to circumvent sanctions”,” Privalova clarified.

In her view, even with a positive outcome, Binance’s policy will tighten, making the platform less convenient for broad use. The crypto exchange is unlikely to be able to work with U.S. clients, which will affect its revenue.

In the long run, regulators’ drive for total control would lead to the triumph of decentralised exchanges across the market, the lawyer added.

Earlier, on March 27, the CFTC filed a lawsuit against Binance and Zhao. The regulator contends that the platform violated derivatives trading rules by operating without the necessary registration.

Zhao called the regulator’s suit “unexpected and disappointing,” noting that the exchange had cooperated with the CFTC for more than two years. In turn, the head of the Commission Rostin Behnam stated that Binance’s actions were a clear case of evading the law, and the United States authorities should have “intervened aggressively and as quickly as possible.”