On Monday, the US Securities and Exchange Commission filed a fresh lawsuit against the largest crypto exchange by daily trading volume Binance. The SEC accused Binance and the current chief executive Changpeng ‘CZ’ Zhao, for contravening the law.
In a 136-page report, the SEC claimed that Zhao and his team used falsified information to mislead the customer, investors, and regulators. Binance also faces charges for misappropriation of customers’ funds.
SEC Accuses Binance for Violating Regulations
The SEC submitted their report to the US federal court in Washington, DC, for further legal action. In their submission, the SEC accused Binance of guiding the customers to bypass the existing Know-Your-Customer (KYC) rules.
The report mentioned that Binance provided instructions to the user on circumventing KYC rules and engaging in unlawful crypto activities.
In support of this, SEC chair Gary Gensler stated that the Binance team led by Zhao was involved in deceptive activities. Gensler noted that Binance lacked disclosure of vital information to the public.
He stated that the Binance US and Binance.com encountered competing interests that limited the growth of the firm. Therefore Gensler urged the public to be careful when investing their assets with an unlawful trading platform.
Binance Charged with 13 Cases
In his statement, Gensler requested the court to freeze Binance’s digital assets. He noted that due to the nature of the Binance case, there was a need to hire a receiver who would manage the firm property and prevent losses.
The SEC argued that some of the Binance digital tokens BNB and BUSD, classified as securities, were unlawfully traded. Furthermore, SEC observed that Binance and its US subsidiary failed to comply with the registration process to operate as a broker, clearing agency, and dealership.
Initially, during the launch of Binance US, the crypto exchange was registered as an independent entity operated separately from its parent company. The SEC noted that Zhao and Binance breached the company laws by controlling the US affiliate company.
Binance React to SEC Charges
Commenting on the SEC allegation, the Binance team felt disappointed by the regulatory agency. Initially, the Binance team had engaged in good-faith negotiations to resolve the matter.
The crypto exchange lamented that SEC lacked clarity on digital assets rules. The Binance team plans to invest in protecting the trading platform.
Irrespective of this, the SEC observed that the Binance team misappropriated customers’ funds. According to the SEC, Binance transferred substantial amounts of customers’ funds to an account partially owned by Zhao Merit Peak Limited. The SEC observed that other customers’ funds were sent to a third party to facilitate the buying and selling of cryptos.
In an interview with a former SEC attorney, Paul Kisslinger revealed that the SEC plans to bring the key market player to legal action. Kissinger stated that lately, the SEC had filed multiple lawsuits against best-performing crypto firms. He added that Gensler had slammed noncompliant firms for violating SEC regulations.
Binance Market Outlook
In his final statement, Kisslinger lamented that the SEC has been filing for a new case against high-profile crypto firms every time.
In 2021 SEC noted that assets worth $145 million were moved from the Binance US account to Sigma Chain. Afterward, Binance US received $45 million from its Nevada-based business partner.
Reportedly the Sigma Chain withdrew $11 million from its primary account that was used to acquire a yacht. A few months ago, the SEC investigated whether the troubled crypto exchange engaged in illegal trading of the digital token BNB in 2017.
Furthermore, the SEC argued that most of the crypto assets offered by Binance were traded as securities. Among the token under questioning included Solana (SOL), Polygon (MATIC), Filecoin (FIL), Cardano (ADA), and others.
Following the June 6 announcement, the Binance native token (BNB) established a dribbling momentum. According to CoinMarketCap, BNB dropped by 7.94% to trade at $277.16 in a day. The BNB market capitalization was reported to decrease to $43,197,507,227, a 7.93% decrease in the last 24 hours.