CFTC Lawsuit: Binance Gave ‘VIP’ Edge to Big Traders
A lawsuit against Binance alleges the cryptocurrency giant gave preferred treatment to high-frequency traders.
The Commodity Futures Trading Commission (CFTC) sued Binance Monday (March 27) for violations of the Commodity Exchange Act (CEA) and CFTC regulations.
Among the revelations in the suit are allegations that the world’s largest crypto company offered a “VIP” program that gave perks to big trading firms, such as faster access to the company’s platform, The Wall Street Journal (WSJ) reported Thursday (March 30).
These revelations evoke some of the concerns raised about high-frequency trading, which critics say allows firms to make money at the expense of less experienced traders, the report stated.
Binance told one New York-based firm that — as a VIP — it would have a 5- to 10-millisecond advantage over non-VIP firms, according to the report.
Joe Saluzzi, a partner at equity brokerage Themis Trading and a critic of high-frequency trading, told the WSJ this practice is troubling.
“In any industry, you try to give big clients a discount,” Saluzzi said, per the report. “But this isn’t a discount; it’s an advantage. They can use it to make more revenue. If I was one of their other clients, I’d be a bit upset.”
Binance has said it finds the suit “unexpected and disappointing” after two years of what it called collaborative work with the CFTC.
“Nevertheless, we intend to continue to collaborate with regulators in the U.S. and around the world,” the company said in a Monday statement to PYMNTS. “The best path forward is to protect our users and to collaborate with regulators to develop a clear, thoughtful regulatory regime.”
The WSJ report also noted that the CFTC’s lawsuit could indicate the regulator is putting greater examination into how American companies access offshore crypto exchanges.
The news comes as Binance is facing increased scrutiny on several fronts. For example, Wednesday (March 29) saw reports that Catherine Coley, former CEO of Binance.US, had hired an attorney amid a government investigation into the company.
Also Wednesday, the Financial Times reported that Binance spent years hiding its connections to China, contradicting claims by the company that it had left the country following a 2017 government crackdown on the crypto sector.
In a statement to PYMNTS, a Binance spokesperson rejected the claims in the FT report, saying that Binance “does not operate in China nor do we have any technology, including servers or data, based in China.”
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