The Securities and Exchange Commission (SEC), the financial market regulator in the United States, has filed a lawsuit against Binancethe world’s largest cryptocurrency exchange, and its CEO, Changpeng Zhao (CZ), for alleged violation of US securities rules.
The SEC charges
The SEC has issued a series of charges against Binance and its CEO, Changpeng Zhao:
1. Unregistered Offer and Sale of Digital Assets: SEC Alleges Binance Offered and Sold Crypto Assets Without Them register correctly. Under US law, assets that qualify as securities must be registered with the SEC before they are offered or sold to the public.
2. Failure to Restrict US Investor Access to Binance.com: SEC Says Binance Failed To Prevent american investors to access its international platform, Binance.com. This platform offers access to a wider range of digital assets than the US version of the platform, Binance.US, which is subject to stricter regulatory restrictions.
3. Operation as an Unregistered Exchange, Broker and Clearing Agency: The SEC accuses Binance of acting as an exchange, broker and clearing agency without being duly registered. These activities require registration with the SEC and must comply with strict regulatory standards.
4. Mixing and Misuse of Client Funds: The SEC alleges that Binance and Zhao mixed and misused client funds. More precisely, SEC says Binance and Zhao diverted client funds to Zhao-controlled trading entity called Sigma Chain.
These accusations, if proven, could result in severe penalties for Binance and CZ, including significant fines and restrictions on their business activities. They also highlight the importance of regulatory compliance for cryptocurrency exchanges, which are increasingly under the spotlight of regulators around the world. Lately, Binance has delisted certain so-called “anonymous” cryptos in certain countries in order to be in compliance with local regulations.
Consequences for Binance
Following these accusations, Binance’s native token, BNB, experienced a significant drop, losing 7.2% of its value in 24 hours.
For her part, the queen of cryptos also fell following these accusations, recording a loss of 5% in 24 hours.
The reaction of Binance and the industry
CZ, for his part, reacted on Twitter saying he hadn’t seen the complaint yet.
He also referenced his usual mantra of ignoring “FUD” (Fear, Uncertainty, Doubt), suggesting thathe would not let himself be destabilized by these accusations. Binance also expressed disappointment with the SEC complaint and claimed that it has been actively cooperating with SEC investigations.
Big names in crypto have already given their unwavering support to the crypto giant, like Justin Sun.
Some even establish a geo-political link between trading authorization by Hong Kong on 1er June and the SEC lawsuit a few days later.
Anyway, deposits, withdrawals, and all Binance services are fully functional so far.
Sources: CZ, Justin Sun, Binance