Benzinga - Crypto exchange Binance and its founder Changpeng Zhao have been sued by the US Securities and Exchange Commission for allegedly engaging in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.
The SEC filed 13 charges against the crypto exchange and Zhao, alleging that while public statements have been repeatedly made about U.S. customers being restricted from transacting on Binance.com, the Binance founder and his company in reality subverted their own controls to secretly allow high-value U.S. customers to continue trading on the Binance.com platform.
Further, the SEC alleged that, while Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes.
In its response, Binance stated that the SEC's action was an attempt to rush to claim jurisdictional ground from other regulators and was devoid of any concerns for investors.
"It seems based on these developments that the SEC’s goal here was never to protect investors; if that were truly the case, the Staff would have thoughtfully engaged with us on the facts and in our efforts to demonstrate the safety and security of the Binance.US platform. The SEC’s real intent here, instead, appears to be to make headlines," Binance further stated.
The SEC further accused Zhao and Binance of manipulating customer assets, including diverting them to Zhao's own entity, Sigma Chain.
It also claimed that BAM Trading and BAM Management misled investors about non-existent trading controls on Binance.US.
The SEC alleged that Sigma Chain conducted manipulative trading to inflate trading volumes artificially.
Additionally, it contended that the defendants secretly blended billions of investor dollars, diverting them to another Zhao-owned entity, Merit Peak Limited.
Responding to this charge, Binance stated that any allegations that user assets on the Binance.US platform have ever been at risk are wrong.
"All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure, and we will vigorously defend against any allegations to the contrary," it added.
SEC Chair, Gary Gensler claimed that Binance and its CEO have been deceiving their investors about risk controls, trading volumes, and even who operated the platform.
They allegedly tried to circumvent U.S. securities laws through the creation of deceptive controls, he said.
Adding to this, the Director of the SEC's Division of Enforcement, Gurbir S. Grewal, said that Zhao and Binance knowingly evaded regulations, jeopardizing their customers and investors to amplify their own profits.
According to Grewal, by engaging in unregistered offerings and combining roles of various financial entities, Binance imposed significant risks and conflicts of interest on its investors.
Meanwhile, in its lawsuit, the SEC categorically labeled 12 digital tokens as securities in its legal action against cryptocurrency exchange Binance, its founder Changpeng Zhao, and the company's U.S. branch. The tokens in question include Binance's native BNB (CRYPTO: BNB), the Binance USD stablecoin (CRYPTO: BUSD), Solana (CRYPTO: SOL), Cardano (CRYPTO: ADA), Polygon (CRYPTO: MATIC), Filecoin (CRYPTO: FIL), Cosmos Hub (CRYPTO: ATOM), The Sandbox (CRYPTO: SAND), Decentraland (CRYPTO: MANA), Algorand (CRYPTO: ALGO), Axie Infinity (CRYPTO: AXS), and Coti (CRYPTO: COTI).
Recently, the U.S. Commodity Futures Trading Commission brought a lawsuit against Binance in March, charging the company with breaches of trading and derivatives laws.
The legal case asserts Binance facilitated transactions in various cryptocurrencies, such as Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), Litecoin (CRYPTO: LTC), Tether (CRYPTO: USDT), and its own Binance coin (CRYPTO: BNB), referred to as commodities within the lawsuit's context.
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