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On Monday, June 5, the US Securities and Exchange Commission (SEC) slapped a lawsuit on the world’s largest cryptocurrency exchange alleging it of violating the securities laws.
The SEC has also slapped further charges on the crypto exchange accusing it of misleading investors and regulators as well as mishandling customer funds. It also accused Binance for flouting basic know-your-customer rules for years together and making Americans trade in an insecure environment.
The SEC has slapped a total of thirteen charges against the crypto exchange and its chief executive officer Changpeng Zhao. Speaking on the development, SEC Chair Gary Gensler noted: “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. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
The regulator has requested the court to freeze Binance’s assets and also appoint a receiver. Along with these charges, the SEC said that the two Binance-linked tokens, BNB and BUSD, are securities that the firm has been illegally offering customers.
It also noted that Binance and its US affiliate aka Binance.US weren’t independent of each other. Instead, CZ used Binance.US as a shield for the main company, noted the SEC. “While Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes,” the SEC said.
Binance called the SEC’s charges “disappointing” adding that it has always tried to engage in good faith with the securities regulator. The exchange also said that SEC has been negligent in offering clear crypto rules to industry players.
“While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis,” the firm said. “We intend to defend our platform vigorously.”
As per the CNBC report, two successive Binance CEO’s expressed concerns over Zhao’s level of control, with the SEC. Both the CEOs testified before the US SEC, however, their identities haven’t been disclosed. “I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left,” a former Binance.US CEO identified as “BAM CEO B” testified to the SEC.
After the Binance lawsuit, the SEC’s oversight now spans across $115 billion worth of digital assets. Apart from Binance’s native BNB Coin, the SEC has named few other altcoins such as Cardano’s ADA, Solana’s SOL, Polygon’s MATIC, Filecoin’s FIL and Algorand’s ALGO, in the lawsuit.
Soon after the SEC lawsuit, the crypto market came crashing down. The Bitcoin (BTC) price tanked 4% falling under $26,000. Binance’s BNB Coin corrected the most dropping more than 9% on Monday. All of the other top ten altcoins have corrected anywhere between 5-10%.