The US Securities and Exchange Commission (SEC) has sued Binance, the world’s largest crypto exchange, and its CEO on several charges of violating securities laws and other charges.
In the SEC’s complaint filed in the United States District Court for the District of Columbia, the regulator alleges that Binance and its CEO Changpeng Zhao have enriched themselves with billions of dollars while ignoring investor protection laws and putting customers at “significant risk”. ” to walk.
The SEC accused BAM Trading and BAM Management, the companies that operate as Binance.US, of manipulative trading and inadequate oversight of their platform.
“And defendants BAM Trading and BAM Management defrauded stocks, retail and institutional investors over alleged surveillance and controls of manipulative trading on the Binance.US platform, which in fact were virtually non-existent.”
The complaint also targets BNB, Binance’s native token, and BUSD, the exchange’s stablecoin, which was already targeted by regulators earlier this year. According to the SEC, Binance has unlawfully engaged in unregistered offerings and sales of “crypto asset securities”.
Binance is accused of “depriving investors of material information, including the risks and trends affecting the company and an investment” regarding its BNB Vault and Simple Earn return-generating systems.
Binance and Zhao have also been accused of using gray areas to mix up customer funds, sometimes involving a company called Merit Peak Limited, which the SEC says is personally controlled by Changpeng Zhao.
“Lack of regulatory oversight, Defendants were free to transfer investors’ crypto and fiat assets as Defendants wished, sometimes mixing and diverting them in ways that properly registered brokers, dealers, exchanges and clearing houses would not have can do.
For example, through accounts owned and operated by Zhao and Binance, billions of dollars in client funds from both Binance platforms were mixed into an account of a Zhao-controlled entity (called Merit Peak Limited), which funds were then transferred to a third party party apparently in connection with the purchase and sale of crypto assets.”
Binance has since responded to the allegations, stating its intention to “vigorously defend our platform”.
Binance says in a statement,
“We will work with industry partners to defend this important technology against misguided litigation. And we will continue our relentless efforts to provide our users with a safe and trusted platform that remains true to our core value of advancing the freedom of money.”
At the time of writing, Bitcoin (BTC) and Ethereum (ETH) are both down about 5% from two hours after news of the complaint surfaced. Altcoin markets are falling more dramatically, with TOTAL2, which is responsible for all crypto assets besides BTC, down more than $22 billion at the time of writing.
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Featured image: Shutterstock/zeber