SEC Sues Crypto Exchange Binance, CEO Changpeng Zhao Over Multiple Securities Violation Allegations
In a landmark move, the SEC Sues Crypto Exchange Binance and CEO Changpeng Zhao, a significant development in the world of crypto asset trading. The Securities and Exchange Commission (SEC) has lodged several securities law violation charges against Binance Holdings Ltd., its U.S. based affiliate, BAM Trading Services Inc., and founder Changpeng Zhao, according to an announcement made earlier today.
The SEC’s allegations are comprehensive and suggest a deep-seated disregard for legal regulations within Binance. Despite public assurances by Zhao and Binance stating U.S. customers were prohibited from transacting on Binance.com, the SEC alleges that these controls were covertly bypassed to allow high-value U.S. customers continued access.
In addition, the SEC alleges that the independence of Binance.US, created specifically for U.S. investors, was a smoke screen, with Zhao and Binance secretly controlling operations behind the scenes. A move seen by the SEC as the corporation “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” as quoted by SEC Chair Gary Gensler.
The most damning charge indicates that Zhao and Binance had the liberty to commingle or divert customers’ assets, including to a Zhao-controlled entity called Sigma Chain. This level of control allegedly led to misleading investors about non-existent trading controls over Binance.US and manipulative trading activities that falsely inflated trading volume.
Unregistered national securities exchanges
Compounding these charges, the SEC is accusing Binance and BAM Trading of operating unregistered national securities exchanges, broker-dealers, and clearing agencies. This lack of registration extends to their offering and sale of Binance’s crypto assets, including their exchange token, BNB, and a stablecoin, Binance USD (BUSD).
The news that “SEC Sues Crypto Exchange Binance and CEO Changpeng Zhao” also brings attention to the allegation that billions of dollars in investor assets were commingled and sent to a third party, Merit Peak Limited, owned by Zhao, without disclosure.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated that “Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits.”
With the public now aware that SEC Sues Crypto Exchange Binance and CEO Changpeng Zhao, it remains to be seen how these charges will impact the future operations of the world’s largest crypto asset trading platform. The lawsuit stands as a stark reminder to investors about the importance of transparency and regulation within the crypto industry.