In a groundbreaking development, the U.S. Securities and Exchange Commission (SEC) has taken legal action as SEC sues Binance. The SEC’s lawsuit alleges that Binance and its billionaire founder, Changpeng Zhao, violated U.S. securities laws and actively targeted American customers.
SEC sues Binance move comes in response to allegations that Binance enticed U.S. investors to use its unregulated international exchange, thereby triggering SEC’s legal action as it sues Binance. Despite Zhao dismissing the allegations on Twitter, the SEC’s lawsuit, comprising 13 charges, marks the initiation of a significant legal battle.
On the other hand crypto community says that it’s ”SEC vs Crypto” as they read about the SEC sues Binance news, just like Twitter user @RohanJT shares:
It’s not SEC vs CZ/Binance
It’s SEC vs Crypto.
We gotta act together !
— Rohan JT (@RohanJT) June 5, 2023
SEC sues Binance as they accuse Binance of deliberately evading their own controls
The SEC’s lawsuit against Binance and Zhao revolves around multiple allegations. It accuses the company and its CEO of deliberately evading their own controls to enable high-net-worth U.S. investors and customers to trade on Binance’s unregulated international exchange.
Astonishingly, a senior executive even confessed that the company operated as an unlicensed securities exchange in the United States. The SEC’s complaint also asserts that Binance established Binance.US as a means to shield its main operations and Zhao himself, utilizing it to obscure law enforcement targets and evade regulatory scrutiny. This context underscores the significance of SEC’s decision as SEC sues Binance.
Concerns over funds commingling
The SEC’s complaint raises grave concerns regarding the mingling of investor funds and the employment of evasion strategies by Binance and Zhao, leading to SEC’s action as it sues Binance. It alleges that Binance commingled billions of dollars in user funds and transferred them to a European company controlled by Zhao.
Such actions blatantly contravene federal laws prohibiting the unregistered offer and sale of securities. The SEC further contends that Binance’s compliance efforts in 2019 were largely a facade, lacking genuine commitment to adhering to regulatory requirements. The SEC’s decision to sue Binance underscores the gravity of these concerns.
Market manipulation and wash trading
In addition, the SEC’s lawsuit accuses Binance and Zhao of engaging in market manipulation and wash trading, highlighting the necessity of SEC’s legal action as it sues Binance. It asserts that Binance utilized market-making entities under its control, namely Merit Peak and Sigma Chain, to artificially inflate trading prices and profit from their customers.
These entities, acting as “market makers,” consistently executed customer orders to buy or sell cryptocurrencies. However, the SEC points out multiple issues associated with their roles, including the commingling of customer funds with Binance’s own resources and the deceptive practice of wash trading, which involves conducting trades between accounts under the exchange’s control to create artificial market activity and inflate prices.
Response and legal implications
In response to the charges, Zhao responded on Twitter with a single number, “4,” a phrase used within Binance’s community to dismiss fear, uncertainty, and doubt (FUD) amid SEC’s lawsuit as it sues Binance.
Binance expressed disappointment with the SEC’s decision to file a complaint, emphasizing its active cooperation with the SEC’s investigations and its efforts to reach a negotiated settlement in good faith.
The SEC’s lawsuit represents a significant legal battle for Binance and Zhao, with potential ramifications for the future regulation of cryptocurrency exchanges and their compliance with securities laws in the United States. The initiation of SEC’s legal action as SEC sues Binance underscores the magnitude of the situation.
As the SEC sues Binance and its CEO Changpeng Zhao, this legal battle marks a critical milestone in the regulation of the cryptocurrency industry. The SEC’s allegations of securities violations, funds commingling, market manipulation, and wash trading pose substantial challenges for Binance and Zhao. The outcome of this lawsuit will have significant implications for the future of cryptocurrency exchanges and the enforcement of securities regulations within the United States.