LONDON (Bywire News) - The U.S. Securities and Exchange Commission (SEC) has initiated an intensive investigation into Binance Holdings Ltd., the largest cryptocurrency exchange globally, and its founder, Changpeng Zhao. The SEC has filed thirteen charges against Binance and Zhao, accusing them of significant securities law violations, such as operating unregistered exchanges, misrepresenting trading controls, and offering unregistered securities1.
The SEC alleges that Zhao and Binance had publicly stated that U.S. customers were restricted from Binance.com. However, they had covertly allowed high-value U.S. clients to continue trading on the platform. Furthermore, while Binance.US was publicly announced as a separate, independent platform, Zhao and Binance allegedly had covert control over its operations1.
One of the charges also includes the commingling of customer assets and diverting these assets at will, including to Sigma Chain, an entity owned and controlled by Zhao. This practice is believed to have misled investors about non-existent trading controls and engaged in manipulative trading, artificially inflating the platform’s trading volume.
SEC Chair Gary Gensler commented on the matter, stating that Binance and Zhao "engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law". The SEC's mission is to protect investors and facilitate capital formation by promoting a fair, orderly, and efficient market.
In a response to the charges, Zhao stated via Twitter that Binance would issue a formal response after reviewing the SEC's complaint and that the exchange's team is ensuring the stability of its systems.
This investigation is part of a larger crackdown on the crypto industry by the SEC, emphasizing the need for regulatory compliance. The charges against Binance and Zhao could have significant implications for the future of cryptocurrency exchanges and could set a precedent for how regulators handle similar violations in the industry.
As a result of these charges, Binance Coin's (BNB) market cap has seen a sharp decrease. Binance has pledged to work with regulatory authorities and address the concerns raised, but the outcome of this case could shape the regulatory landscape for cryptocurrency exchanges, providing a more secure environment for investors.
The crypto community is attentively watching the developments in this case, as they could have substantial impacts on the future of Binance and the wider cryptocurrency market. The outcome of the case could potentially establish clearer guidelines for the operations of cryptocurrency exchanges, helping to create a safer investment environment.
In conclusion, this case serves as a stark reminder of the need for transparency and regulation in the cryptocurrency industry. Investors should be aware of the inherent risks associated with investing in this largely unregulated market, and should be vigilant about where they choose to invest their hard-earned assets.
(Writing and editing by Michael O'Sulilvan)