The U.S. Securities and Exchange Commission (SEC) has sued Binance, the largest crypto exchange in the world, as well as its CEO, under several allegations of breaking securities laws and other accusations.
In the SEC’s complaint filed with the United States District Court for the District of Columbia, the regulator alleges that Binance and its CEO Changpeng Zhao have enriched themselves by billions of dollars while ignoring investor protection laws and putting customers at “significant risk.”
The SEC accused BAM Trading and BAM Management, the companies operating as Binance.US, of manipulative trading and having insufficient surveillance over its platform.
“And 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 complaint also zeroes in on BNB, Binance’s native token, and BUSD, the exchange’s stablecoin, which was already targeted by regulators earlier this year. According to the SEC, Binance unlawfully engaged in unregistered offers and sales of “crypto asset securities.”
Binance is accused of “depriving investors material information, including the risks and trends that affect the enterprise and an investment” in regards to its yield-generating systems BNB Vault and Simple Earn.
Binance and Zhao are also accused of using regulatory grey areas to commingle customer funds, at times with a company called Merit Peak Limited, which the SEC says is personally controlled by Changpeng Zhao.
“Lacking regulatory oversight, Defendants were free to and did transfer investors’ crypto and fiat assets as Defendants pleased, at times commingling and diverting them in ways that properly registered brokers, dealers, exchanges, and clearing agencies would not have been able to do.
For example, through accounts owned and controlled by Zhao and Binance, billions of U.S. dollars of customer funds from both Binance Platforms were commingled in an account held by a Zhao- controlled entity (called Merit Peak Limited), which funds were subsequently transferred to a third party apparently in connection with the purchase and sale of crypto assets.”
Binance has since responded to the allegations, voicing an intention to “defend our platform vigorously.”
Says Binance in a statement,
“We will work alongside industry partners to defend this important technology from misguided lawsuits. And we will maintain our unceasing efforts to deliver a safe and trusted platform for our users that holds true to our core value of furthering the freedom of money.”
At time of writing, Bitcoin (BTC) and Ethereum (ETH) are both down roughly 5% less than two hours after news of the complaint surfaced. Altcoin markets are dipping more dramatically, with TOTAL2, which accounts for all crypto assets besides BTC, down more than $22 billion at time of writing.
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