US SEC sues world’s largest crypto exchange Binance and founder

June 6, 2023

By Sharan Kaur Phillora

Binance, the world’s largest crypto exchange, operated illegally in the US, the US Securities and Exchange Commission alleges in a new lawsuit. Changpeng Zhao, the exchange’s founder, was named in the suit as well.

Here’s what we know: 

According to the complaint filed by the SEC on Monday in federal court in Washington, DC, Binance and Zhao are further accused of secretly controlling customers’ assets and allowing the commingling and diversion of customer funds without restriction. The SEC claims that Binance established separate US entities as part of an elaborate scheme to evade US federal securities laws.

The SEC also alleges that from approximately three years ago until June 2022, Sigma Chain, a trading firm owned and controlled by Zhao, engaged in wash trading on the Binance.US platform. This practice artificially inflated the trading volume of crypto asset securities.

SEC Chair Gary Gensler stated, “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.”

The news of the lawsuit had an immediate impact on the cryptocurrency market. Bitcoin, the world’s largest cryptocurrency, experienced a 6 percent drop to its lowest level in nearly three months, while Binance’s own cryptocurrency, BNB, the fourth-largest by market size, decreased by over 5%.

This legal action by the SEC is the latest in a series of challenges for Binance. In March, the US Commodity Futures Trading Commission sued the exchange, alleging it operated an “illegal” exchange and had a “sham” compliance program. Binance is also under investigation by the US Department of Justice for suspected money laundering and sanctions violations.

Previous reports by Reuters have alleged that Binance processed at least $10 billion in payments for criminals and entities attempting to evade US sanctions. However, Binance denied these allegations, stating that users who sent money to the specified account were not making deposits but rather purchasing Binance’s dollar-linked crypto token.

About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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