On June 5, the District Court for the District of Columbia received a lawsuit filed by the United States Securities and Exchange Commission (SEC) against Binance, its U.S. platform, and CEO Changpeng Zhao (CZ).
The SEC has presented 13 charges against the exchange, which include accusations of conducting unregistered offers and sales of tokens such as BNB and BUSD, as well as operating products like Simple Earn, BNB Vault, and its staking program. Additionally, the lawsuit claims that Binance failed to register its platform as an exchange or a broker-dealer clearing agency. Furthermore, it alleges that both Binance and BAM Trading (Binance.US’ legal entity) did not register Binance.US as an exchange, broker, or clearing agency. CZ is being sued as a “controlling person.”
According to the lawsuit, the defendants have accumulated billions of U.S. dollars for themselves while putting investors’ assets at significant risk. The suit also states that the defendants have conducted multiple unregistered offers and sales of crypto asset securities and other investment schemes.
The lawsuit further asserts that defendants BAM Trading and BAM Management deceived equity, retail, and institutional investors by making false claims about surveillance and controls regarding manipulative trading on the US Platform, which were, in reality, almost non-existent.
SEC Charges Binance for Illegal Trading
The charges against Binance include allegations that the company did not enforce restrictions on U.S. investors accessing Binance.com. Furthermore, the lawsuit states that the US platform participated in wash trading through its undisclosed trading firm called Sigma Chain, which is owned by CZ.
Additionally, the suit asserts that funds from both the main exchange and Binance.US were mixed together in an account controlled by Merit Peak Limited, an entity associated with CZ. These charges align with the complaints previously filed by the Commodity Futures Trading Commission on March 27. In response to those charges, CZ published a detailed blog post denying the allegations.
Gary Gensler, the Chair of the SEC, stated that Zhao and the exchange provided misleading information to investors about risk controls and manipulated trading volumes. They also allegedly concealed the identities of the platform operators, the manipulative trading practices of their affiliated market maker, and the custodial arrangements for investor funds and crypto assets.
The SEC is seeking a permanent injunction to prevent the prime crypto exchange and CZ from engaging in further activities, as well as the disgorgement of any unlawfully obtained profits with interest, and financial penalties.