Brazilian SEC Probes Binance Over Allegations of Aiding Clients in Dodging Stop Order Restrictions

Brazilian SEC Probes Binance Over Allegations of Aiding Clients in Dodging Stop Order Restrictions

Time Stamp: April 20, 2023 1:09 PM
Source Node: 2597076

The Brazilian Securities and Exchange Commission (CVM) has initiated an investigation into the global cryptocurrency exchange Binance, amid allegations that the company provided guidance to clients on evading stop order restrictions. This signals increased scrutiny on Binance operating within Brazil, as regulators look to enforce compliance with local rules and regulations.

Is Binance In Brazil’s Hot Water?

Binance, the world’s largest cryptocurrency exchange, is facing an investigation in Brazil by the Federal Prosecutor’s Office and Federal Police, as reported by Valor Econômico newspaper. The platform is accused of aiding clients in evading a stop order imposed on cryptocurrency derivatives investments.

The Brazilian Securities and Exchange Commission (SEC) informed the Attorney General of the State of São Paulo that Binance may have persisted in offering cryptocurrency derivatives to its clients, despite the SEC issuing a stop order on such offerings in 2020. Under Brazilian law, futures contracts are considered securities, irrespective of the nature of the underlying assets.

According to the newspaper, the SEC has provided police with screenshots from August 2021, revealing instructions for Brazilian users to change their language settings in order to access the Binance Futures section. The SEC also highlighted the abundance of Portuguese-language content, with no notices of restrictions for Brazilian users.

As Binance faces increased scrutiny from Brazilian authorities, the exchange’s operations in the country could be significantly impacted. If the investigation confirms the allegations of assisting clients in evading stop order restrictions, the company may face substantial fines or even a suspension of its license to operate in Brazil.

Binance Continues To Gain Regulatory Spotlight

The Brazilian investigation is another setback for Binance, which has been working to establish a more compliant presence in various jurisdictions. The company has recently taken steps to enhance its regulatory compliance by hiring former regulators and industry veterans to its executive team. However, the ongoing regulatory challenges underscore the difficulties crypto platforms face in balancing innovation and growth with the need for adherence to established rules.

In a statement, Binance emphasized that it “does not offer derivatives in Brazil” and is operating in compliance with local regulations. The exchange also asserted its commitment to maintaining an ongoing dialogue with authorities to accelerate the growth of the crypto and blockchain sectors in Brazil and globally.

This is not the first time Binance has faced such allegations. The exchange continued operating in the Canadian province of Ontario for months after informing the Ontario Securities Commission that it would cease activities there. In February, Binance reportedly acknowledged that it was working with US regulators to address compliance issues. Moreover, in March, the company was sued by the US Commodity Futures Trading Commission over alleged trading violations.

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