Binance and CEO face 13 charges by the SEC, citing securities laws violation

Binance entities and CEO Changpeng Zhao are facing 13 charges from the US SEC.
Allegations revolve around securities law violations, among other crimes that the regulator has been clamping down against.
SEC Chair has called out the two household names for deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.
The regulator warns users against the two household names.

Binance Exchange and its CEO Changpeng Zhao (CZ) are the latest targets by the United States Securities and Exchange Commission (SEC). Reportedly, the two household names have violated numerous securities laws, culminating in 13 charges in one go. Citing agency Chair Gary Gensler:

Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.

Reportedly, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform. They also manipulated the trading of affiliate market makers, even where and with whom investor funds and crypto assets were in custody. Below is a detailed overview of the complaint.

Also Read: Will Binance CEO Changpeng “CZ” Zhao be the next Elon Musk for meme coins?

Binance and CEO charged by the SEC

Binance Holdings Ltd. and the famous CEO Changpeng Zhao face 13 different charges from the US SEC. Based on a recent press release, the duo, whose names go hand in hand, have violated several securities laws. Considering Binance Holdings Ltd, otherwise termed Binance, operates Binance.com and its US-based partner BAM Trading Services Inc. and Binance.US, the charges are against the entire powerhouse.

The press release alleges that Changpeng Zhao and his crypto conglomerate secretly went against their own restrictions against US customers transacting on Binance.com. Reportedly, “high-value customers in the US were allowed to trade on the exchange.” The federal regulator has also determined that while Binance and its CEO publicly claimed that Binance.US was an autonomous trading platform for investors in the US, things were different behind the scenes as CZ and Binance controlled the US-based entity’s operations.

Allegedly, Binance and CZ also control assets of the platform’s entire customer base, which according to the SEC, leaves a loophole for commingling customer assets at will. Specifically, the regulator calls attention to Zhao’s Sigma Chain entity. Further, the agency calls out BAM Management, comprising BAM Trading and BAM Management US Holdings, Inc., for misleading investors that they controlled Binance.US’ trading operations when in a real sense, this control was nonexistent. Similarly, Zhao’s Sigma Chain is accused of manipulative trading to create the perception that the platform’s trading volume was thriving.

Binance and CEO violated critical registration-related provisions of the federal securities laws

Binance and CZ are also charged Binance entities for violating key registration-related provisions of the federal securities laws, including “operating unregistered national securities exchanges, broker-dealers, and clearing agencies.”

Binance and CZ are also charged for concealing billions of dollars of investors’ assets and sending them to a third party, Merit Peak Limited, owned by CZ himself. An excerpt from the complaint climaxes the entire filing, saying:

They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes to keep high-value US customers on their platforms. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.

Other details in the complaint include:

Providing trading for securities such as BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI.
Providing coin-earning programs BNB Vault and Simple Earn, and staking investment plans.
Intentionally evading US supervision.

Crypto Twitter comes to Binance and CEO's defense

In a stunning turn of events, Crypto Twitter has responded to the development. One response that stands out is by Cardano (ADA) founder Charles Hoskinson, in the following tweet:

With respect to Binance, I'm reading through the SEC complaint. It's over 130 pages, but seems like the next in a series of steps to implement chokepoint 2.0 in the United States. The end goal is a agenda based CBDC partnered with a handful of massive banks and end-to-end control…
— Charles Hoskinson (@IOHK_Charles) June 5, 2023

Still, others have come to the rescue of Binance and its CEO, so much so that Changpeng Zhao has reacted to one retaliation against the SEC. Tron founder Justin Sun has also expressed support.

Changpeng Zhao's response thus far has been a tweet saying "Stronger together."

Also Read: Binance Coin price crashes by 10% as SEC sues Binance and CEO Changpeng Zhao

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