Binance is on the grill. The crypto exchange platform and its managing director Changpeng Zhao are the subject of lawsuits from the Securities and Exchange Commission (SEC). The American financial policeman accuses the Hong Kong-based company of violating federal securities laws, by offering its users unregistered securities – like its BNB token or its BUSD stablecoin. Charges that also apply to the crypto wallet developed by Binance, according to the complaint filed by the SEC with a court in Washington DC
The regulations under discussion
In detail, the company is accused of not having registered either as a compensation body, or as a broker, or as an exchange. The SEC also points the finger at the management of Binance customer deposits: ” billions of dollars ” allegedly diverted by Merit Peak Limited and Sigma Chain, companies linked to Changpeng Zhao, which allegedly “personally received $62.5 million from one of Binance’s bank accounts” between October 2022 and January 2023. Which would not have been possible if the company had been properly registered.
The company would also have authorized people residing in the United States to carry out exchanges via its international structure, even though it had undertaken not to do so. “When its platform launched in 2019, Binance announced that controls would be implemented to block US customers. Changpeng Zhao did the opposite, directing Binance in a way that helped some major customers circumvent these controls. » The SEC-filed complaint cites comments a former Binance compliance officer allegedly made to one of the employees in December 2018: “We operate an exchange not registered in the United States” (read the tweet below).
Today we charged Binance Holdings Ltd. (Binance); US-based affiliate, BAM Trading Services Inc., which, together with Binance, operates https://t.co/swcxioZKVP; and their founder, Changpeng Zhao, with a variety of securities law violations.https://t.co/H1wgGgR5ir pic.twitter.com/IWTb7Et86H
— US Securities and Exchange Commission (@SECGov) June 5, 2023
In response to the SEC’s complaint, which he deems ” unfounded “, Binance tweeted accusing the institution of wanting to seek « eradicate [son] industry “. The trading platform appeals to Congress, hoping to see “legislation creating a realistic regulatory framework” be voted on. Without which, according to her, “the role of the United States as a leader in digital asset innovation will be threatened”. Remarks that echo those made by its American counterpart Coinbase, which recently threatened to shift its center of gravity to other countries in the event that the sector would not be better framed in the country in the short term.
The SEC’s offensive against Binance is cause for concern at Coinbase, whose stock fell 9% on Monday. Berenberg analyst Mark Palmer explains in a note that the complaint “similar to those previously filed against Bittrex and Kraken” And “holds up what could happen for Coinbase”. And to add: “We estimate that at least 37% of its revenue could be compromised, if its crypto exchange and storage operations were targeted. » The expert therefore advises investors to assess whether the company “has the ability to adapt its economic model and its geographical focus, in the event that it is forced to reduce its sails in the United States”.