Crypto exchange Binance sued by SEC in latest US regulatory blow

The US securities market watchdog has sued the world’s largest crypto exchange, Binance, accusing it of siphoning billions of dollars of customer cash with a separate trading firm owned by its chief executive.

The 13 civil charges filed by the Securities and Exchange Commission on Monday are the latest regulatory blow to Binance and its chief Changpeng Zhao after another US financial agency filed suit in March.

The SEC’s alleged violations include operating unregistered exchanges, misrepresenting broker-dealers and clearing agencies as well as trading controls and monitoring on Binance’s US platform. The SEC complaint states that between mid-2018 and mid-2021, the group generated at least $11.6bn in revenue.

The SEC alleged that Binance and Zhao had control of customers’ assets, which allowed funds to be merged or re-transferred, with billions of dollars being sent to a crypto asset trading firm called Merit Peak Ltd. Zhao-owned British Virgin Islands.

Assets were allegedly diverted to a separate entity owned and controlled by Zhao, Sigma Chain, which the SEC said engaged in “manipulative trading” that inflated the trading volume of the Binance US platform .

“Through 13 counts, we allege that Zhao and the Binance Entities engaged in a widespread web of fraud, conflict of interest, lack of disclosure and calculated evasion of the law,” said Gary Gensler, SEC Chairman.

Binance.com, Binance’s offshore trading platform, said it was disheartened and disappointed by the SEC’s action, adding that while it took the regulator’s allegations seriously, they “should not be the subject of SEC enforcement action”. Binance US called the lawsuit “baseless”.

The SEC alleges that although Binance and Zhao “publicly claimed” US customers were banned from Binance.com, they “secretly allowed” top US customers to trade on the platform. Reversed his own controls.

Gurbir Grewal said, “We allege that Zhao and the Binance entities not only did not know the rules of the road, but also consciously chose to evade them and put their customers and investors at risk – all at their own risk.” In an effort to maximize profits.” Director of the SEC’s Division of Enforcement.

According to the SEC complaint, Binance’s unnamed chief compliance officer told a colleague in 2018: “We’re operating as an unlicensed securities exchange in the United States, bro.”

The SEC’s action comes weeks after the US Commodity Futures Trading Commission, a derivatives market regulator, filed a lawsuit against Binance in March, claiming it illegally serviced US customers, and its The reported trading volume and profitability came from “broad solicitation”. Access to US customers.

“Battling two powerful regulators at the same time will take precious time and resources, and Binance will no doubt lose,” said former CFTC chief of staff Charlie Cooper.

Also in March, the Financial Times revealed Binance — which has long claimed to have no formal headquarters — hid extensive ties to China for years.

A month ago, New York regulators halted the issuance of a Binance-branded stablecoin, a type of digital token that allowed crypto traders to get in and out of the market quickly. Before the coin, named BUSD, was shut down, it represented about 40 percent of Binance’s trading volume.