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The U.S. Commodity Futures Trading Commission (CFTC) sued crypto exchange Binance and founder Changpeng “CZ” Zhao Monday on allegations the company knowingly offered unregistered crypto derivatives products in the U.S. against federal law.The lawsuit, filed in the U.S. District Court for the Northern District of Illinois on Monday, alleged that Binance operated a derivatives trading operation in the U.S., offering trades for cryptocurrencies including bitcoin (BTC), ether (ETH), litecoin (LTC), tether (USDT) and Binance USD (BUSD), which the suit referred to as commodities. The suit also alleged that the company, under CZ’s leadership, directed its employees to spoof their locations through the use of virtual private networks. ��The CFTC is charging Binance with violating laws around offering futures transactions, “illegal off-exchange commodity options,” failing to register as a futures commissions merchant, designated contract market or swap execution facility, poorly supervising its business, not implementing know-your-customer or anti-money laundering processes and having a poor anti-evasion program.The price of bitcoin fell around $1,000 after the suit was first filed, while Binance’s exchange token BNB fell about 3%. Crypto-related stocks also fell after the suit was published.According to the CFTC, the global exchange, which has a U.S. affiliate in�Binance.US, created a system to hide its true reach and operations.“Binance’s reliance on a maze of corporate entities to operate the Binance platform is deliberate; it is designed to obscure the ownership, control, and location of the Binance platform,” the filing said, adding that “Zhao answers to no one but himself.”In a press release, CFTC Chief Counsel Gretchen Lowe called Binance’s actions “willful evasion of U.S. law,” pointing to internal chats and emails.Moreover, the suit alleged, Binance directed customers in the U.S. to use a variety of methods to evade restrictions on U.S-based customers.“Binance has instructed U.S. customers to evade such controls by using VPNs to conceal their true location,” the suit alleged. “VPNs have the effect of masking an internet user’s true IP address. VPN use by customers to access and trade on the Binance platform has been an open secret, and Binance has consistently been aware of and encouraged the use of VPNs by U.S. customers.”The company directed important customers such as trading firms to set up shell companies in places such as Jersey, the British Virgin Islands and the Netherlands to avoid restrictions, the filing said to escape restrictions, and was fully aware of the scale of its U.S. business, the filing said.“Binance knew that U.S. customers continued to comprise a substantial proportion of Binance’s customer base,” the filing said, citing internal monthly reports sent to Zhao which said that, even as of June 2020 after controls had supposedly been implemented, 17.8% of customers were based in the U.S.