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SEC Sues Binance, Claiming World’s Largest Crypto Exchange Deceived Regulators

2 mins
Updated by Ali Martinez
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In Brief

  • The SEC has thrown the book at Binance, the largest crypto exchange, for a pattern of alleged violations.
  • The myriad charges include operating unregistered exchanges, misrepresenting trading controls, and diverting customer assets.
  • Binance's founder, Changpeng Zhao, responded on Twitter, assuring users of stable systems and promising a detailed rebuttal of the charges.
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The Securities and Exchange Commission (SEC) has sued Binance, the world’s largest crypto exchange, over reputed securities law breaches. 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.

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 far-reaching 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.

According to the SEC, the accused operated unregistered exchanges, broker-dealers, and clearing agencies. And that is far from all. 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 drove up 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 venue for US customers.

Binance Secretly Controlled Binance.US

The charges also address alleged violations of registration-related clauses of federal 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.

Another tweet from Binance stated, “Today, the SEC filed civil claims . . . in what is the latest example of regulation by enforcement under the current Commission. To be clear, we believe the lawsuit is baseless and we intend to defend ourselves vigorously.”

BNB, Binance’s token, is down roughly 6% following the news.

BeInCrypto has reached out to Binance for comment.

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Josh Adams
Josh is a reporter at BeInCrypto. He first worked as a journalist over a decade ago, initially covering music before moving into politics and current affairs. Josh first owned Bitcoin in 2014 and has followed the space ever since. He is particularly interested in Web3 adoption, policy and regulation, CBDCs, privacy, and the future of the metaverse.
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