The United States Securities and Exchange Commission (SEC) has filed a lawsuit against leading cryptocurrency exchange, Binance. The regulatory agency alleges that Binance and its CEO Changpeng Zhao (CZ) ‘blatantly’ violated securities laws by offering certain cryptocurrencies to U.S.-based investors.
SEC’s Complaint
The 136-page complaint filed on Monday claims that Binance secretly offered its trading services to US customers, despite publicly claiming in 2019 that it would no longer serve customers in the region. The SEC further alleged that Binance and its CEO largely controlled its U.S.-focused entity Binance.US, despite claiming that the latter was a separate entity.
“Among other things, the SEC alleges that, while Zhao and Binance publicly claimed that U.S. customers were restricted from transacting on Binance.com, Zhao and Binance in reality subverted their own controls to secretly allow high-value U.S. customers to continue trading on the Binance.com platform,” the SEC said.
The SEC also accused Zhao and Binance of controlling the assets of their platform’s customers, enabling them to combine or redirect customer assets at their discretion, even to an entity owned and operated by Zhao known as Sigma Chain.
Additionally, according to the complaint, the defendants tried to hide the fact that they were combining billions of dollars in investor assets and redirecting them to a third-party entity, Merit Peak Limited, which is also owned by Zhao.
SEC Files 13 Charges Against Binance and CZ
As stated in the complaint, the SEC charged Binance and its CEO with 13 counts of violating U.S. securities which include operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities.
“Through thirteen 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,” SEC Chair Gary Gensler said.
CZ, in his response to the complaint, stated that his team is closely monitoring the situation to ensure that all systems remain stable, including withdrawals and deposits. He added that they have not yet seen the complaint and will issue a response once they have seen it.
