there Securities and Exchange Commission (SEC) sued the world’s largest cryptocurrency exchange, binance, to operate an illegal trading platform in the United States by misusing customer funds. As a defendant, he was questioned Changpeng ZhaoFounder and CEO of Binance.
Not only. Request from a federal judge Binance assets freeze and appointing a trustee for bankruptcy, to whom control of the same company can be transferred. Remember, the SEC typically seeks recipients in cases involving fraud — such as Ponzi schemes — or where regulators don’t trust management to run a company in accordance with the law.
SEC allegations
According to the SEC, both Binance and Zhao mishandled customer funds by diverting them to a company controlled by Zhao.
It is about the trading company, Sigma serieswhich in turn participated in the activities ofManipulative trading(Manipulative trading), This made Binance look bigger than it actually was. there Securities and Exchange Commission The case was filed in federal court in the District of Columbia. Binance is committed toblatant disregard for investor protection laws and the federal market they protectThe agency wrote its complaint to the court.
Binance also concealed that it had mixed billions of dollars in customer assets and sent them to a third party, Merit Peak, which was owned by WSJ, and which handled Zhao’s SEC complaint.
“This will be a historical casesaid Kurt Gottsall, partner at Haynes and Boone. “The SEC seems to be very concerned about mixing up client funds“.
The SEC also says that Binance was selling cryptocurrencies, including BNB and BUSD, that had to comply with investor protection rules. The value of the BNBwhich is a Binance token, fell by more than 7% Follow the news.
Binance is in the crosshairs of the US authorities
It’s not just the SEC, Binance has been in the crosshairs of US regulators for years now. Notably, the Securities and Exchange Commission and the Department of Justice sued Binance.US in late 2020, according to documents seen by the Wall Street Journal. Officials have stepped up efforts to bring the issue of cryptocurrency trading to court over the past year after the collapse of several companies in the sector, including one of Binance’s biggest competitors: FTP extension.
This adds to the challenges Binance faces with US regulators and law enforcement agencies. there Commodity futures trading commission The CFTC said in March that Binance and Zhao They evaded agency rules, covering platforms offering derivatives to US traders. In addition, the cryptocurrency exchange is also facing an investigation by the Department of Justice (DOJ) in the matter related to Money laundering.
Back at the SEC, regulators said that in 2018, Zhao and his firm attempted to circumvent the agency’s rules while allowing VIP US traders to use the foreign platform. According to the complaint, Binance helped some traders bypass technology designed to block US users from accessing Binance.com. Zhao also created Binance.US, which was to be an independent entity created for users in the United States. Instead, Zhao and Binance dominated the US exchange.
The SEC lawsuit also alleged that Binance for years lacked controls to prevent one of the simplest forms of manipulative trading. In January 2021, according to the SEC, Binance.US users can still make laundering trades, placing buy and sell orders to trade effectively with themselves. Washing trading is prohibited by US law because it can be used to artificially increase volume and manipulate prices.
Binance replied
Patrick Hillman, Chief Strategy Officer at Binance, told the paper that the world’s largest cryptocurrency exchange has not seen significant inflows of user funds.
“Our team is ready to ensure the stability of systems, including withdrawals and deposits,” Zhao said, referring to the possibility of customers withdrawing funds.
Binance stated that it is staunchly defending its platform and its two sons He denied the allegationsUsers’ assets on the Binance.US platform have never been in danger.
“All user assets on Binance and its affiliated Binance platforms, including Binance.US, are safe and secure, and we will vigorously defend ourselves against any allegations to the contrary,” the company said.
Markets reaction
There wasn’t much market reaction after the SEC’s allegations, Binance Token rallied, and BNB is up 0.6% today, after a crash. 7% Yesterday, a $278.
While the queen of cryptocurrencies, Bitcoin, is after a decline 4% Recorded in the last 24 hours, traveled today $25,760. But above all, as we were already hinting, the world’s largest crypto exchange did not experience any outflows of users’ funds after the news.
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