On Monday June 5, the U.S. Securities and Exchange Commission posted a press release on its site that said that it has filed 13 charges against both Binance Holdings Ltd (Binance) as well as its founder Changpeng Zhao for violating several security laws. The civil lawsuit was filed in the Federal District Court in Washington. The value of major crypto currencies including bitcoin and ether fell after the charges were filed.
According to the SEC release the charges state that Binance operates “unregistered exchanges, broker-dealers, and clearing agencies.” It also misrepresents trade controls as well as oversight on its platform in the U.S., which is called Binance.US. It also operates “unregistered offer and sale of securities.”
SEC Chair Gary Gensler said, “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” and more.
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Binance operates the largest crypto asset exchange in the world. The SEC alleges that it violated US security laws under the following:
Unregistered offer and sale of crypto assets
Failing to restrict access of the Binance website by U.S. investors
Making misleading statements to investors.
The Justice Department is also investigating Binance for violations related to money laundering. Late last year auditing firm Mazars said that it would discontinue business with crypto currency companies. Despite these setbacks Changpeng Zhao, who is also called C.Z., posted “4” on a social media platform.
Parallels can be drawn with FTX, the second largest crypto marketplace that collapsed last November. Its CEO Sam Bankman-Fried is facing multiple criminal charges. FTX used Alameda Research as its trading firm while Binance used an entity called Merit Peak, without providing information to its customers.
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