The Securities and Exchange Commission (SEC) has sued Binance, the world’s largest crypto exchange, for violating securities laws. The 13 charges are some of the most serious ever leveled against a player in the industry. The exchange’s founder, CZ, promises a full rebuttal of the charges.
The SEC’s announcement of 13 charges against the world’s largest crypto exchange, Binance, on Monday quickly made headlines worldwide. The charges relate to Binance Holdings Ltd., its US affiliate BAM Trading Services Inc., and founder Changpeng Zhao. All stand accused of multiple securities law violations.
SEC Outlines Charges
The SEC action is one of the most serious in the industry’s history. Binance is by far the largest of all crypto exchanges. A report released in mid-May put its share of the spot market at 46.8% percent.
The charges include operating unregistered exchanges, broker-dealers, and clearing agencies. And, the SEC alleges that Binance and Zhao lied about trading controls on the Binance.US platform, thus letting high-value U.S. customers continue trading on Binance.com.
Furthermore, the SEC accuses Zhao and Binance of commingling and diverting customer assets. Binance sent the assets to an entity owned by Zhao called Sigma Chain, the SEC claims. Sigma Chain also allegedly engaged in manipulative trading that artificially inflated the platform’s trading volume.
Moreover, the complaint alleges that BAM Trading misled users about trading controls on Binance.US, while Zhao’s affiliated market maker engaged in manipulative trading.
In addition, the SEC accuses Zhao and Binance of secretly controlling the operations of Binance.US. Despite stating that it started as an independent trading platform for US customers.
Binance Secretly Controlled Binance.US
The charges also address alleged violations of registration-related clauses of the federal securities laws. Including operating as an unregistered exchange, broker-dealer, and clearing agency.
SEC Chair Gary Gensler said in a lengthy statement:
“Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied. They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value US customers on their platforms. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
On Twitter, CZ quickly reacted to the SEC’s move. He said his team was “standing by, ensuring systems are stable, including withdrawals, and deposits.” And he added that the company would soon be issuing a full response.
BNB, Binance’s token, is down roughly 6% following the news.
BeInCrypto has reached out to Binance for comment.
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