In new complaint, the SEC alleges that the largest cryptocurrency exchange in the world, Binance, engaged in “an extensive web of deception.”
Monday, the U.S. Securities and Exchange Commission (SEC) filed a new lawsuit against Binance. The federal regulator filed 13 charges against the largest cryptocurrency exchange in the world and its founder, Changpeng Zhao, alleging violations of U.S. securities law and accusing the company of running an illegal trade.
“Through thirteen 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,” stated SEC Chair Gary Gensler in a press release.
The charges include operating unregistered exchanges, broker-dealers, and clearing agencies, misrepresenting trading controls and oversight on the Binance US platform, and offering and selling unregistered securities.
The complaint continues, “This case arises from Defendants’ blatant disregard of the federal securities laws and the investor and market protections these laws provide. In so doing, Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”
Binance’s Back and Forth
Binance pushed back against the complaint, characterizing it as an attempt to unilaterally defining the market structure for cryptocurrencies. They wrote in a statement, “The Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology.“
Binance insists it is willing to “cooperate with regulators” despite some combative statements made by its leadership in 2018. According to the complaint, Zhao has long attempted to “escape the registration requirements of federal securities laws.” Under Zhao’s leadership, the Chief Compliance Officer stated that they never wanted Binance to be regulated.
The SEC has several crypto-related cases in its sights, including a March warning sent to Coinbase informing the company that enforcement action may be forthcoming. Since then, Coinbase has filed a lawsuit against the SEC, requesting that the regulators clarify whether crypto is a security.
The SEC is also investigating Do Kwon, the CEO of Terraform Labs, and the notoriously unstable stablecoin Terra, the founder of jailed cryptocurrencies. The SEC alleged that he and his company transferred 10,000 bitcoins worth hundreds of millions of dollars from the Terra/Luna project before its collapse in May 2017.
