Crypto Markets Stumble on Binance Legal Woes, but Not as Bad as FTX

Crypto prices dipped moments after news broke Monday of the CFTC suing Binance and affiliated executives on allegations of trading and derivatives violations. 

BNB, Binance’s native token, lost around 5% in short order. 

Bitcoin (BTC) dropped 3.8% to $26,737, before recovering to $26,917 Monday just after 12 pm in New York. On Nov. 11, 2022, the day FTX filed for bankruptcy, bitcoin lost more than 6%. 

Ether (ETH), which lost nearly 7% on Nov. 11, was trading about 3.5% lower by early Monday afternoon. 

“Based on recent actions taken by US regulators, the CFTC taking actions against Binance isn’t entirely surprising. This may be why the markets are largely nonplussed by the lawsuit,” Darius Tabatabai, co-founder of decentralized exchange Vertex Protocol, said. 

“That said, when you consider that suits have been announced against KuCoin, Kraken, and Coinbase, it certainly appears that there are headwinds that traders should consider as we move into the second quarter, and it will be fascinating to see how this all plays out in the court system,” Tabatabai added.

In the lawsuit, filed Monday in Illinois, the CFTC claims that Binance “has solicited and accepted orders, accepted property to margin, and operated a facility for the trading of futures, options, swaps, and leveraged retail commodity transactions involving digital assets that are commodities including bitcoin (BTC), ether (ETH), and litecoin (LTC) for persons in the United States.”

Binance CEO Changpeng Zhao and Samuel Lim, the exchange’s former chief compliance officer, are named in the complaint as defendants.

The lawsuit comes shortly after Binance announced it would do away with zero-fee trading for 13 bitcoin spot trading pairs. Volumes on the exchange plummeted, moving Binance’s market share down 20%, according to data from research firm Kaiko. 

“As of mid-March 2023, zero-fee trade volume accounted for a majority of total volume, clocking a high of 66%,” Kaiko analysts said in a note Monday before the lawsuit was filed.

Updated March 27, 2023 at 12:30 pm ET: Added comment from Darius Tabatabai, co-founder of decentralized exchange Vertex Protocol.

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