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The U.S. Securities and Exchanges Commission (SEC) has been investigating Binance over allegations of violations during the launch of the Binance Coin (BNB).
BNB ICO In Trouble After 5 Years
The Binance Coin is the official crypto of the Binance ecosystem and was launched in an initial coin offering (ICO) back in 2017. Now, five years later, the SEC has accused the crypto exchange of breaking securities rules during the ICO and is investigating the same. The SEC, which believes that most cryptocurrencies are securities, has filed charges of securities rule violation against many ICO projects. In addition, there have been claims that at least one U.S. resident had participated in the BNB ICO in 2017, which has given the SEC a reason to investigate the exchange for securities violation.
However, Binance CEO Changpeng Zhao (CZ) wrote and published a blog in 2020, addressing some concerns over the wording in the coin’s whitepaper, which could be alluding to it being a security. He wrote,
“In January 2019, we changed the wording around “buy-backs” and the association with “20% profits.” This was done based on a third-party legal counsel advice indicating the potential for being misunderstood as a security is higher in certain regions, and it was not accurately describing the fact that we don’t need to “buy-back.” We hold BNB.”
Reuters Reports Binance Behind-The-Scenes
There has been a bit of a spotlight on Binance’s activities, not just from the SEC. A report from an extensive investigation into the exchange’s role in fraudulent activities was published by Reuters on May 6. The report claimed that the exchange had processed at least $2.35 billion worth of transactions from hacks, investment frauds, and narcotics sales between 2017 and 2021. It also claimed that Binance’s Know Your Customer (KYC) and Anti-Money Laundering (AML) checks were not upto the mark during that period.
The report specifically mentions the involvement of the North Korean hacker group Lazarus in some of these hacks, along with Binance’s surreptitious connections with Russian drug mart Hydra. The claims were all disputed by a Binance spokesperson, who stated,
“[The report is a] woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations. The fact is that Binance has some of the strictest AML policies in the fintech industry and plays a significant leadership role in helping law enforcement deal with cyber and financial crime. Since the article ran, we have received an outpouring of support from partners in law enforcement across the globe.”
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