(Bloomberg) -- Jane Street Group, Tower Research Capital and Radix Trading are the three unidentified trading firms cited as “VIP” clients of Binance Holdings Ltd. in a top US regulator’s lawsuit against the cryptocurrency exchange, according to people with direct knowledge of the matter.

The Commodity Futures Trading Commission last week accused Binance of “sham” compliance with US derivatives regulations, including failing to keep Americans off its exchange as promised and not registering with the regulator. 

The three US quant firms were cited anonymously by the CFTC in its March 27 lawsuit as examples of how US clients accessed the platform. The regulator didn’t accuse them of wrongdoing. 

Still, the lawsuit’s mention of US-headquartered companies using offshore entities to trade on Binance sent a chill through the quant industry. Even as many have dabbled in crypto, equities and other more traditional assets remain their bread and butter, and a serious regulatory misstep could have repercussions on their broader ability to conduct business. 

Radix is Trading Firm A described in the CFTC complaint, Jane Street is Trading Firm B, and Tower Research is referred to as Trading Firm C, said the people, who asked not to be identified discussing the details that haven’t been made public. The Wall Street Journal first reported Radix’s identity.

Jane Street declined to comment. Radix and Tower didn’t respond to multiple requests for comment. Radix co-founder Benjamin Blander told the Journal that it believed it did nothing wrong in trading through offshore entities on Binance and that it has been cooperating with the CFTC. 

A representative for the CFTC, the US’s main derivatives regulator that claims significant jurisdiction over crypto assets, declined to comment. Binance, which has said it has boosted compliance and was disappointed by the CFTC’s accusations, didn’t respond to a request for comment.

The CFTC’s complaint alleged that Binance “actively facilitated violations of U.S. law” by helping unspecified traders based in the US evade know-your-customer rules and compliance measures meant to block their access. 

Trading by Wall Street firms, for themselves or on behalf of clients, on overseas venues that aren’t registered with US regulators like the CFTC can be a compliance gray area.

“For trading firms, the consideration is the potential for risk and exposure it would have to their license and activity in the United States,” said Aaron Kaplan, an attorney and founder and co-chief executive officer of Prometheum, a digital asset exchange.

VIP Treatment

According to the CFTC, the institutional trading firms active in trading Bitcoin perpetuals and other crypto derivatives on Binance received “VIP” treatment from the exchange.

The crypto platform’s “white glove” treatment included lower transaction fees and faster access for trades in return for providing liquidity on the exchange and trading fee revenue, the CFTC said. Binance also offered to provide its top traders “prompt notification of any law enforcement inquiry concerning their account,” according to the complaint.

For its part, Binance has long said it isn’t required to register with the CFTC because it walls off US users from accessing its global platform, where more complex crypto derivatives products can be traded. 

But the CFTC alleged Binance’s strictures were weak, and, in some instances, the exchange helped firms get around them. For example, Binance, according to the CFTC complaint, instructed Trading Firm A, which was really Radix, to access the exchange’s website through a virtual private network. 

Meanwhile, Trading Firm B entered into a “services agreement” with an entity registered in Jersey, a British dependency, according to the complaint. That firm, which was described as one of Binance’s largest customers, was Jane Street, the people said. 

“Trading Firm B’s Jersey nominee does not have any employees and does not have any meaningful sources of capital, apart from Trading Firm B,” the CFTC said in its lawsuit against Binance. 

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