SEC Sues World’s Largest Crypto Firm on Several Charges

Liam Fegan
Liam Fegan
Lockheed Martin Financial Analyst since June of 2018. If you want a better life, raise your standards and don't compromise them.

More From Me

The US Securities and Exchange Commission (SEC) has launched a new legal case against Binance, the globe’s leading cryptocurrency exchange, accusing it of unauthorized operation in the United States. The lawsuit also names Changpeng Zhao, the founder of the exchange, as a defendant. According to the lawsuit, the defendants have amassed billions of U.S. dollars at the expense of investors’ asset security. The SEC accuses Binance and Zhao of unlawfully attracting investors, undertaking numerous unregistered investment activities, and falsely reassuring equity, retail, and institutional investors about the adequacy of surveillance and control over potential fraudulent trading on the Binance.US platform.

Binance, responding to the lawsuit, expressed its disappointment about the SEC’s decision to proceed with the complaint, which seeks various remedies, including what it claims to be emergency relief. The company insists that it has been proactive in cooperating with the SEC’s inquiries, providing answers, and addressing issues raised by the commission. However, Binance’s response does not directly confront many of the SEC’s claims. Instead, Binance criticizes the SEC’s regulatory approach as overly aggressive, favoring enforcement and litigation instead of a nuanced understanding of the multifaceted technology. In the lawsuit, the SEC accuses Binance of acting as a broker-dealer, exchange, and clearing agency without the appropriate registration.

Furthermore, the SEC singled out the BUSD token, a stablecoin issued by Paxos, and Binance’s BNB token, asserting that they should have been properly registered as securities. The SEC contends that the overall intent was to evade regulatory scrutiny. Binance has consistently maintained that Binance.US operates independently from the main exchange. However, the SEC alleges that while making public assurances that Binance didn’t cater to US citizens, Zhao and other Binance representatives guided investors to circumvent safeguards intended to restrict their use of the platform. This isn’t the first time this accusation has surfaced.

Additionally, the lawsuit alleges that Binance failed to implement controls against market manipulation that the firm claimed to have made. As a result, it alleges, Binance could not meet basic exchange registration requirements, such as having rules to prevent fraud and manipulation, and the ability to enforce those rules. Specifically, there were no checks for “wash trading,” a fraudulent practice where an investor artificially raises an asset’s price by purchasing it from their own account.