The cryptocurrency market experienced a downturn on Monday following the news of the U.S. Securities and Exchange Commission (SEC) charging Binance, the largest global crypto exchange, with multiple allegations.
Bitcoin and Ether, the two leading cryptocurrencies, saw a decline of up to 2.5% and 2% respectively, while Binance’s native token BNB dropped by as much as 7% immediately after the lawsuit announcement.
According to court documents released on Monday, the SEC accuses Binance of misusing consumer funds and engaging in unauthorized security sales.
The agency claims that Binance’s BNB token and its stablecoin BUSD, which experienced a brief depegging on Monday, are considered securities.
The court filing further alleges that Binance and BAM Trading, under the leadership of Changpeng Zhao, unlawfully offered an exchange, broker-dealer, and clearing agency services without registering with the SEC.
The SEC argues that by evading registration, Binance aimed to circumvent regulatory oversight designed to safeguard investors and markets.
The charges brought against Binance bear similarities to the allegations faced by Sam Bankman-Fried, the founder of the now-collapsed exchange FTX.
The SEC claims that Bankman-Fried transferred consumer funds from FTX to Alameda, a trading entity he owned. Similarly, the SEC’s lawsuit against Binance mentions the alleged trading of consumer funds with third parties.
Market Impact and Investor Concerns: The SEC’s charges against Binance have had a direct impact on the cryptocurrency market.
Bitcoin, Ether, and BNB experienced notable declines as investors reacted to the news. The allegations raise concerns about regulatory compliance and consumer protection practices within the crypto industry.
Market participants will closely monitor the outcome of the lawsuit and the potential implications for Binance, as well as the broader crypto market.