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The Securities and Exchange Commission has sued Binance, the world’s largest crypto exchange.
SEC takes aim at Binance
The 13 civil charges filed accuse Binance of violations including mixing billions of dollars of customer cash with a separate trading firm owned by its chief executive.
It is the latest regulatory blow to Binance and its chief, Changpeng Zhao, after another US financial agency sued it in March.
The allegations include operating unregistered exchanges, broker-dealers and clearing agencies as well as misrepresenting trading controls and oversight on Binance’s US platform.
Between mid-2018 and mid-2021, the group earned at least $11.6 billion in revenue, the SEC’s complaint said.
The SEC alleged Binance and Zhao had control of clients’ assets, which allowed funds to be merged or rerouted, with billions of dollars sent to a crypto asset trading firm incorporated in the British Virgin Islands owned by Zhao called Merit Peak Limited.
Assets were also allegedly diverted to a separate entity owned and controlled by Zhao, Sigma Chain, which the SEC said engaged in “manipulative trading” that inflated the Binance US platform’s trading volume.
“Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” said Gary Gensler, SEC chair.
Binance US called the lawsuit “baseless”. The SEC alleged that although it and Zhao “publicly claimed” US customers were barred from Binance.com, they “subverted their own controls to secretly allow” top US clients to trade on the platform.
“We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk — all in an effort to maximise their own profits,” said Gurbir Grewal, director of the SEC’s division of enforcement.
According to the SEC complaint, Binance’s unnamed chief compliance officer in 2018 told a colleague: “We are operating as a fking unlicensed securities exchange in the USA bro.”
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