SEC’s Binance Suit Has Heavy Mixture of Anticipated Fees, Novel Revelations

The announcement of the United States Securities and Exchange Commission (SEC) suit against Binance, Binance.US and Binance CEO Changpeng Zhao (CZ) may have taken the crypto community by surprise, but the SEC’s focus on exchanges is well known. The suit’s content was met with a variety of reactions.

CZ Claimed In a tweet on the morning of June 5, “the media gets information before we do,” and the company had not yet seen the SEC’s complaint. Evidence of the behind-the-scenes scuffle can be seen in two statements released in response to the suit.

The exchange called the suit “disappointing” in a blog post and Stressed on The SEC’s failure to provide clarity and guidance, as well as its impact on financial innovation. A later statement distributed by email addressed the legal issues more closely, claiming there was a lack of due process and promising a vigorous defense.

Corey Klipstein, CEO of financial firm Swann Bitcoin, said of the allegations that anyone who was paying attention should not have been unaware of the SEC’s complaint. He claimed in a statement to Cointelegraph:

“These practices of Binance are essentially open secrets, so no one working in the space would be surprised by any allegations.”

Some details will still raise eyebrows. The most quotable passage in the suit undoubtedly came from an unnamed Binance chief compliance officer in 2018, who said in a message to another company official:

“We are operating as an unlicensed securities exchange in the USA Bro.”

More highlights from Brian Brooks’ short tenure as CEO of Binance.US. Brooks, the former US comptroller of the currency and CEO of Binance.US for three months in 2021, is memorably cited in the suit (as “CEO B” of BAM Trading). According to the SEC, Brooks said in testimony:

“[W]e became clear to me at a certain point that CZ was the CEO of BAM Trading, not me. (…) I realized, huh, I’m not really going to run this company, and the mission that I guess that’s not the mission I signed up for. And as soon as I realized it, I left.

The SEC has repeatedly claimed that almost all cryptocurrencies are securities, so a list of 10 coins may also be illuminating. There are well-known claims, such as that Filecoin (FIL) is a security. Algorand (ALGO) has also been selected before.

However, for Solana (SOL), Cardano (ADA) and Polygon (MATIC), the Binance suit could be a warning shot.

And guess which tokens are illegal securities. Spoiler alert it involves Solana and Cardano. pic.twitter.com/wMdICfIE3j

— Stephen Diehl (@smdiehl) June 5, 2023

There were already signs that a shakeup was underway at the exchange. Almost simultaneously with news of the SEC’s complaint, Bloomberg reported that Richard Teng may be favored to replace CZ as the exchange’s next CEO. The news service cited “persons with direct knowledge”.

Related: Binance Prepares Checkbook for Potential Fines from US Regulators: Report

Teng was Appointed To head to all regional markets outside the US on May 29. He joined Binance Singapore in August 2021, coming from the Financial Services Regulatory Authority in Abu Dhabi Global Market, where he was CEO, and “rising quickly through the ranks.”

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