Binance Under Fire: SEC Files 13 Charges, Alleges Market Manipulation and Deceptive Practices

NEW DELHI: In a significant blow to Binance, the world’s largest cryptocurrency exchange, US regulators have charged the company with violating securities laws.

The Securities and Exchange Commission (SEC) filed a complaint in a federal court in Washington, accusing Binance, its CEO Changpeng Zhao, and the operator of its supposed independent US exchange of engaging in an “extensive web of deception” and a “calculated evasion of the law.”

This latest legal action follows a series of troubles for Binance, including a lawsuit by the US Commodity Futures Trading Commission (CFTC) and a probe by the US Justice Department for suspected money laundering and sanctions violations.

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The SEC’s complaint alleges that Binance committed 13 offenses, including operating an unregistered securities exchange and failing to restrict US customers from its platform. The regulator claims that Binance artificially inflated its trading volumes, diverted customer funds, and misled investors about its market surveillance controls. Furthermore, the complaint asserts that Binance and its CEO secretly controlled customers’ assets, allowing them to mix and divert investor funds as they pleased.

The SEC’s case also implicates Changpeng Zhao’s trading firm, Sigma Chain, in wash trading that artificially inflated the trading volume of crypto asset securities on Binance. The commission revealed that Sigma Chain spent $11 million from an account on a yacht. Moreover, the complaint alleges that Binance commingled billions of dollars in customer funds in an account held by a Zhao-controlled firm called Merit Peak, in violation of US regulations that require customer money to be kept separate.

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In response to the charges, Binance criticized the SEC’s action, stating that it was a misguided approach that jeopardized the United States’ position as a global hub for financial innovation and leadership. The company vowed to vigorously defend its platform, emphasizing that it was not a US exchange, limiting the reach of the SEC’s actions. Binance assured its users that all their assets on the platform, including Binance.US, remained safe and secure.

This recent legal development adds to Binance’s mounting troubles. In March, the CFTC sued the company for operating an alleged illegal exchange and sham compliance program. Additionally, the US Justice Department is investigating Binance for suspected money laundering and sanctions violations. The SEC’s case portrays Binance as determined to evade US securities law, enriching themselves by billions of dollars while putting investors’ assets at significant risk.

Changpeng Zhao, also known as CZ, founded Binance in 2017 and quickly turned it into the world’s largest cryptocurrency exchange. Born in China and later moving to Canada, CZ installed a tight circle of associates, many with Chinese backgrounds, in key positions within Binance. While the company has hired individuals from traditional financial and regulatory sectors, CZ’s tight control over the company has remained evident.

Binance’s response to the SEC’s charges emphasized the need for collaborative and transparent policy engagement rather than regulation through enforcement. The company stated that digital asset laws are still largely undeveloped worldwide, and it respectfully disagreed with the allegations. However, Binance did not directly refute all of the SEC’s claims, leaving room for potential further legal battles.

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As the situation unfolds, Binance assured its users that its team was working to maintain system stability, including withdrawals and deposits. The outcome of this legal case will have significant implications not only for Binance but also for the broader cryptocurrency industry and the future of digital asset regulation.

KEY HIGHLIGHTS:

• The Securities and Exchange Commission (SEC) has charged Binance with violating securities laws, accusing the company of an extensive web of deception and evasion of the law.
• The SEC’s complaint lists 13 offenses, including operating an unregistered securities exchange and failing to restrict US customers from its platform.
• Binance has been accused of artificially inflating trading volumes, diverting customer funds, and misleading investors about its market surveillance controls.
• The SEC also alleges that Binance and its CEO secretly controlled customers’ assets, allowing them to mix and divert investor funds as they pleased.
• Binance faces mounting legal troubles, including a lawsuit by the US Commodity Futures Trading Commission (CFTC) and a probe by the US Justice Department for suspected money laundering and sanctions violations.
• Binance’s CEO, Changpeng Zhao, founded the company in 2017 and has maintained tight control over its operations.
• Binance criticized the SEC’s action, vowing to vigorously defend its platform, and stated that its users’ assets were safe and secure.
• The outcome of this legal case will have significant implications for the cryptocurrency industry and digital asset regulation.

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