SEC Files Lawsuit Against Binance and CEO Changpeng Zhao, Accusing Them of Numerous Securities Violations:
On Monday, the U.S. Securities and Exchange Commission filed a lawsuit against Binance, the company that operates Binance.US, and its founder and CEO, Changpeng “CZ” Zhao. The lawsuit claims that they violated federal securities laws.
The suit states that Binance, Binance.US, and CZ sold unregistered assets to the public through the BNB token and the BUSD stablecoin, which has links to Binance. The case also alleges that Binance broke securities law with its staking service. Both BAM Trading, which runs Binance.US, and Binance are facing charges for not registering as a clearing agent, broker, or exchange.
According to the SEC, Binance came under suspicion of permitting the mixing of customer funds. They also included that CZ appeared to be secretly running Binance, US. Also, an entity owned and operated by CZ allegedly inflated Binance.US’s trading volume.
Binance’s Alleged Violations of Securities Laws
According to the suit, Zhao and Binance repeatedly told the public that the Binance.com Platform did not serve U.S. people as part of a plan to avoid being regulated by the U.S. government. At the same time, they kept their actions hidden while ensuring that their most important U.S. customers could still trade on the platform.
The lawsuit also said that when the Binance.US Platform came out in 2019, Binance said that it would be implementing controls to stop U.S. users from using the Binance.com Platform. Binance, on the other hand, did the opposite. According to reports, Zhao allegedly instructed Binance to secretly help certain high-value customers from the United States bypass the imposed controls.
According to the lawsuit, Binance’s Chief Compliance Officer stated to a colleague in 2018 that the company was functioning as an unlicensed securities exchange in the United States.
The claim also states that Binance’s lack of proper financial controls led to the theft of customer funds, which could potentially have been used for personal reasons. They also said Merit Peak Limited, a market maker that once worked with Zhao, had access to a sizeable sum of customer funds in the billions of dollars. The SEC further stated that BAM Trading and a BAM Trading safekeeping account gave almost $200 million to Sigma Chain, which CZ ran. The reports further claimed that between October 2022 and January 2023, CZ himself got $62.5 million from a Binance bank account.
Conclusion
The U.S. Securities and Exchange Commission filed suit against Binance and its CEO, Changpeng Zhao, for breaking securities laws. The lawsuit claims that Binance and Binance.US sold unregistered assets to the public, broke securities laws with their staking service, and didn’t register as a clearing agents, broker, or exchange. There are also allegations of improper financial controls, theft of customer funds, and large sums of money transferred to entities connected to Zhao. These legal actions show the regulatory scrutiny and difficulties that Binance and its CEO face in the cryptocurrency industry.
