Binance and CEO CZ sued by CFTC for violating federal laws; Binance Coin price crashes by 6%

Binance and its Chief Executive Officer (CEO) Changpeng Zhao became the latest victim of regulatory crackdown in the United States on March 27. The cryptocurrency exchange's users were quick to react as Binance noted heavy outflows in the four hours following the announcement of the charges.

Binance under CFTC purview

The US Commodity Futures and Trading Commission (CFTC) charged Binance and its CEO, Changpeng Zhao, with violating federal laws. The suit filed against the entities noted that the crypto exchange failed to register itself in the United States. The CFTC further stated in its complaint that Binance had been operating an illegal derivatives exchange through which it earned $63 million in fees. 

The CFTC added,

"By May 2021, Binance's monthly revenue earned from derivatives transactions increased to $1.14 billion. Binance's decision to prioritize commercial success over compliance with U.S. law has been, as Lim paraphrased Zhao's position on the matter, a 'biz decision.'"

While Changpeng Zhao did not respond to the claims with a statement, he simply tweeted "4". The number refers to the code Zhao put out back in January this year, according to which the CFTC's claims were "FUD, fake news and attacks" that he did not agree with.

However, this did not instill much confidence in the exchange's users as they swarmed to pull out their holdings. The outflow on Binance resulted in nearly $541.5 million worth of tokens exiting the exchange in the span of 4 hours. While the outflows were relatively higher than the 24-hour average, it was still less than 1% of Binance's total holdings, which stand at $65.5 billion.

While some criticized the CFTC for attempting to take down Binance without any concrete logic, others believed that the exchange might be in actual trouble of being "toppled."

Adam Cochran, a partner at Cinneamhain Ventures, stated,

"Only semi-safe path for Binance here is likely a settlement which CFTC would still push for the billions in make whole, disgorgement and civil penalty payments but may allow CZ et al to avoid admission of guilt. That still would likely kill off Binance. Returning all fees, salaries, earnings, liquidations etc for all U.S. exposed individuals and entities all the way back to 2017 + civil penalties? No way they can stomach that."

On the other hand, crypto exchange Coinbase's Chief Legal Officer, Paul Grewal, called out the CFTC for its accusations tweeting,

Binance is yet to provide a statement in response to the charges placed against the company.

Binance Coin price

The panic also reached the native token of the exchange as Binance Coin price (BNB) declined by 6.54% in four hours. The altcoin fell to trade at $307.5, losing the immediate support at $321.6 and slipping to the 50-day Exponential Moving Average (EMA).

While the sell-off seemed to have taken a break at the time of writing, any resurgence in the same could bring the exchange token to test the critical support level of $297.8. Falling through it would result in Binance Coin price losing the support of the 100- and 200-day EMAs as well, leaving the token vulnerable to fall to March lows of $275.

BNB/USD 1-day chart

However, if investors' confidence in the exchange and token restores and acquisition at present rates takes place, the cryptocurrency would be saved from further decline. However, in order to initiate a sustainable rally and invalidate the bullish, the critical resistance at $340.7 must be flipped into support. BNB could then mark a new high for 2023 and climb closer to the November high of $354.