The United States Securities and Exchange Commission (SEC) filed suit against Binance, its U.S. platform and CEO Changpeng Zhao (CZ) in the District Court for the District of Columbia on June 5.
4.
Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits.
We will issue a response once we see the compliant. Haven’t seen it yet. Media gets the info before we do.
— CZ Binance (@cz_binance) June 5, 2023
The U.S. regulator pressed 13 charges against Binance, including unregistered offers and sales of the BNB (BNB) and BUSD tokens, the Simple Earn and BNB Vault products and its staking program. In addition, the SEC alleges in the suit that Binance failed to register its Binance.com platform as an exchange or a broker-dealer clearing agency. Further, it claimed Binance and BAM Trading failed to register Binance.US as an exchange, broker and clearing agency. CZ was sued as a “controlling person.”
According to the suit:
It continued, “Defendants BAM Trading and BAM Management defrauded equity, retail, and institutional investors about purported surveillance and controls over manipulative trading on the Binance.US Platform, which were in fact virtually non-existent.”
Among the allegations behind the charges are claims that Binance failed to restrict U.S. investors from using Binance.com, And that Binance.US engaged in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is owned by CZ.
In addition, the suit claims that funds from Binance and Binance.US were commingled in an account controlled by CZ-associated Merit Peak Limited. These charges echo complaints filed by the Commodity Futures Trading Commission on March 27. CZ denied those charges in a detailed blog post.
SEC chair Gary Gensler said in a statement:
The SEC is demanding permanent enjoinment on Binance and CZ from further activities, disgorgement of ill-gotten gains with interest and financial penalties.
The suit claimed that tokens traded on the Binance exchange were securities. Those tokens are BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI.
Binance and Binance.US responded separately to the suit. Binance.US stated in a tweet the SEC’s claims are its “latest example of regulation by enforcement.” The suit “is baseless and we intend to defend ourselves vigorously,” it continued.
In a blog post on Binance.com, the company wrote:
“Any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong,” Binance.com added. “The SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators—and investors do not appear to be the SEC’s priority.”
Allegations against Binance are not new. An SEC investigation of Binance reportedly began in June 2022. Binance has called reports of mismanagement of funds “conspiracy theory.”