US officials at the Department of Justice are preparing to bring fraud charges against the cryptocurrency exchange Binance, but are concerned about a potential mass exodus of users. The story, citing unnamed sources, was reported by Semafor.
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Officials believe the suit could trigger a mass withdrawal of funds, as in the case of collapsed FTX. As a result, consumers could lose their money and may trigger panic in the digital asset markets.
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According to insiders, prosecutors are considering other options to constrain Binance, such as fines and deferred or non-prosecution agreements.
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Such a move would be a compromise, placing responsibility on the company for alleged criminal conduct and reducing losses for customers, according to the Justice Department.
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On June 5 the U.S. Securities and Exchange Commission (SEC) filed suit against Binance and its CEO Changpeng Zhao. The agency brought 13 counts, including the sale of unregistered securities. On June 6 the regulator filed a motion to freeze the digital assets of the exchange’s U.S. unit.
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On June 9, Binance.US users lost the ability to deposit dollars, triggering selling by those seeking to withdraw funds in fiat. Against this backdrop, the BTC/USD quotes on the exchange showed a discount of about $2,200 (7.3%).
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On June 17 the SEC and Binance reached an agreement on customer funds in the United States. The exchange resumed withdrawals of assets, but cautioned that the situation could still change.
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In March, the CFTC accused the trading platform of violating derivatives trading rules and operating without a license. The agency also asserts that the company was aware that some of its customers were sanctioned individuals.
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The agency said that Binance deliberately violated the rules. In response to the accusations, Zhao noted that the regulator’s claims contain \”an incomplete portrayal of the facts,\” and his company does not agree with the characterization of many points.
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In July Binance and its head filed a motion to dismiss the CFTC’s suit in a federal court in Chicago.