The United States Securities and Exchange Commission (SEC) has recently filed a lawsuit against Binance, one of the largest cryptocurrency exchanges worldwide, and its CEO, Changpeng “CZ” Zhao.
The SEC’s allegations include multiple charges related to the violation of federal securities regulations and the operation of an unauthorized stock exchange.
This article provides an overview of the SEC’s claims and highlights the potential consequences for Binance and its CEO.
SEC’s Accusations Against Binance:
The SEC has accused Binance of disregarding several federal securities laws, including allegations of operating an unauthorized stock exchange on Binance.com and Binance.US.
The regulatory body claims that Binance and CZ allowed high-value U.S. customers to continue trading on Binance.com, despite publicly stating that they were barred from doing so.
Furthermore, the SEC alleges that CZ and Binance secretly controlled the operations of Binance.US, a platform supposedly created as a separate entity for U.S. investors.
Charges of Manipulation and Misleading Investors: The lawsuit extends beyond unauthorized operations, accusing Binance of manipulating customers’ assets and diverting funds to Sigma Chain, an entity owned by CZ.
Additionally, BAM Trading and BAM Management US Holdings, companies managing Binance.US, are accused of misleading investors about non-existent trading controls.
The SEC also alleges that Sigma Chain engaged in manipulative trading practices, artificially inflating the trading volume on the platform.
Violation of Securities Registration:
The SEC’s lawsuit, filed in the U.S. District Court for the District of Columbia, accuses Binance and BAM Trading of operating unregistered national securities exchanges, broker-dealers, and clearing agencies.
They are also charged with the unregistered offer and sale of various coins, including BNB and Binance USD (BUSD). CZ is held personally liable for these alleged registration violations.
SEC Chair’s Warning and Enforcement Director’s Statement:
SEC Chair Gary Gensler warned the public to exercise caution when dealing with unlawful platforms such as Binance.
He emphasized the extensive deception, conflicts of interest, lack of disclosure, and evasion of the law alleged in the lawsuit.
Gurbir Grewal, Director of the SEC’s Division of Enforcement, supported Gensler’s warnings, highlighting the conscious choice by CZ and Binance entities to evade regulations and prioritize their profits at the expense of customers and investors.
Implications and Previous Legal Action:
The SEC’s allegations follow a lawsuit filed by the Commodity Futures Trading Commission (CFTC) against Binance and CZ in March.
The CFTC accused them of knowingly facilitating the trade of unregistered crypto-derivative products within the U.S., a violation of federal legislation. With the SEC’s lawsuit, the process of holding Binance accountable for its actions is underway, as noted by Chair Gensler.
