Federal regulators have sued Binance for breaking securities rules.
The Securities and Exchange Commission (SEC) has accused Binance of running an illegal exchange in the US. The world’s largest crypto exchange is charged with mishandling customers’ funds, misleading investors, and blatant disregard of securities laws in the country.
The suit also added the company’s chief executive officer, Changpeng Zhao, as a defendant.
SEC files 13 charges against Binance
The SEC has filed a suit against Binance, its US platform, and the company’s CEO CZ in the District Court for the District of Columbia on June 5.
The 13 charges document filed by the SEC details the alleged Binance exploits. It stated that Binance offered and sold unregistered BNB and BUSD tokens, the Simple Earn and BNB Vault products, and its staking programme.
The SEC also alleged that Binance failed to register Binance.com as an exchange or a broker-dealer clearing agency. It further accused Binance and BAM Trading of failing to register Binance.us as an exchange, broker, and clearing agency. Changpeng Zhao was sued as the “controlling person.”
According to the suit:
“Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk. Defendants have engaged in multiple unregistered offers and sales of crypto asset securities and other investment schemes.”
It continued, “Defendants BAM Trading and BAM Management defrauded equity, retail, and institutional investors about purported surveillance and controls over manipulative trading on the Binance.US Platform, which were in fact virtually non-existent.”
The SEC also alleged that a number of other tokens, including the native coins for the Solana (SOL), Cardano (ADA), Polygon (MATIC), Cosmos hub (ATOM), Sandbox platform (AXS), Axie infinity game and Decentraland (MANA) are securities.
The SEC claimed that through Sigma Chain, a trading platform controlled by CZ, he engaged in wash-trading that inflated the price of crypto asset securities on the Binance.us platform.
SEC Chair Gary Gensler in a statement on Monday:
“Through 13 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.”
These SEC allegations follow the Commodity Futures Trading Commission lawsuit against Binance.
The exchange responded to the SEC suit in a blog post. The firm noted that it was disheartened by the complaints but it was taken the allegations seriously.
“We intend to defend our platform vigorously,” it said in a blog post on Monday. “Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry.”
The defendant, Changpeng Zhao, has also responded in a tweet on Monday. He said his team was standing by and ensuring that the platform was running smoothly despite the complaints.
He tweeted the number 4, his shorthand for urging crypto investors to ignore the attacks, fake news, and FUD (meaning fear, uncertainty, doubt in crypto circles).
Binance has always maintained that it wasn’t subject to US laws as the exchange has no physical headquarters in the country. CZ has said that the company’s headquarters is wherever he’s at a given time.
This is not the first rodeo for Binance. An SEC investigation against the crypto exchange began in June 2022. An exposè by Reuters also alleged that the company processed at least $2.35B in transactions relating to narcotics sales, hacks, and investment frauds from 2017 to 2021.
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