The SEC accuses Binance of mishandling customer funds, operating without proper registration, engaging in the unlawful sale of securities, and assisting high-value U.S. customers in circumventing regulatory controls.
Binance, the world’s leading cryptocurrency exchange, and its CEO, Changpeng Zhao, are currently facing a multitude of charges brought forth by the U.S. Securities and Exchange Commission (SEC). The SEC, in a court filing unveiled on the 5th of June, has accused Binance of mishandling customer funds and operating without proper registration under securities laws.
BAM Trading and Binance.US are also the focus of the SEC’s case, which claims that both companies engaged in the unauthorized selling of stocks and neglected to register with the Exchange Act. Under the direction and control of CZ, Binance and BAM Trading are accused by the SEC of providing three essential securities market services—exchange, broker-dealer, and clearing agency—through the Binance Platforms, all while avoiding the requirement to register with the SEC.
The SEC claims that BAM Trading’s staking program falls under its definition of an investment contract, thus classifying it as a security and are upset about Binance deliberate evasion of regulatory monitoring, which is intended to protect investors and uphold market integrity.
The regulatory body also goes on to assert that both Binance and BAM Trading have been involved in unregistered offers and sales of crypto asset securities, conducting transactions on the Binance Platforms without adhering to the necessary registration requirements.
The CEO of Binance, CZ, has also come under fire from the SEC. According to the lawsuit, CZ had a significant influence over how BAM Trading conducted business in the US. Furthermore, it asserts that CZ gave Binance instructions to help some high-value U.S. customers get around regulatory restrictions while keeping these instructions secret so that Binance wouldn’t have to answer for these acts. This covert action, as described in the court brief, reveals a willful attempt to disregard the laws and norms set in place to safeguard investors and customers.
The lawsuit also emphasizes the SEC’s claim that CZ and Binance actively sought out American investors through their social media presences. The court brief claims that CZ and Binance staff pushed the retention of US investors on the Binance.com Platform despite Binance’s public announcement in June 2019 that it would no longer serve US investors. The SEC’s allegations against the defendants are further supported by this discrepancy between public remarks and private acts.
The complaint doesn’t stop there. Additionally, it argues that the native coin of the Binance Smart Chain, BNB, is an unregistered security and that none of the Binance staking programs complies with the SEC’s registration requirements.
The SEC’s enforcement division’s director, Gurbir S. Grewal, stated the organization’s position on the situation in the following way: “We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk.”
The SEC’s proceedings against Binance and CZ demonstrate their dedication to upholding regulatory compliance, guaranteeing investor protection, and maintaining the market’s integrity.