SEC files suit against Binance and Changpeng Zhao

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against the Binance cryptocurrency exchange and its CEO Changpeng Zhao.

The U.S. regulator brought 13 counts, including unregistered offers and sales of BNB and BUSD tokens, the Simple Earn and BNB Vault products, and staking.

The suit also alleges that Binance failed to register its Binance.com platform as an exchange, broker-dealer or clearing agency, as did its U.S. subsidiary. Zhao is named as a “control person.”

The SEC also designated the following assets as securities: SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO and AXS.

«The defendants unlawfully attracted American investors to buy, sell and exchange crypto assets through unregistered trading platforms accessible online at Binance.com and Binance.US», the suit states.

In a press release, the agency noted that Zhao and his firm controlled client assets, mixed and redirected them “at their discretion.” The SEC contends that the top executive secretly controlled the U.S. subsidiary. Reuters previously reported a similar conclusion.

«They attempted to circumvent U.S. securities laws by announcing fictitious controls that they ignored to retain US-based clients on their platforms», said SEC Chairman Gary Gensler.

The regulator sought a permanent injunction on Binance’s and Zhao’s further activities, disgorgement of ill-gotten gains with interest and financial penalties.

Zhao commented on the news in a tweet bearing the number “4”. In his list it signifies “ignore FUD and fake news”. As of writing, the tweet has been deleted.

«Our entire team is on standby, ensuring system stability, including withdrawals and deposits», Zhao said.

Representatives from Binance said they were disappointed by the SEC’s decision to file the suit. According to the statement, the exchange plans to defend its business, and the regulator’s retreat from constructive engagement is an example of a mistaken and deliberate refusal to provide regulatory clarity for the industry.

Our response to the SEC’s complaint.https://t.co/mgXxGTKr67

— Binance (@binance) June 5, 2023

Against this backdrop, BNB slid from around $300 to near $280. The asset has fallen 7.7% in the last 24 hours, according to CoinGecko.

In March, the filed CFTC. By the agency’s account, the platform violated derivatives trading rules by operating without proper registration and “willfully evading” U.S. law.

In response to the charges, Zhao stated that the Commission’s claims contain “an incomplete statement of facts,” and his company does not agree with many of the points cited.

Rostin Behnam, the regulator’s head, later explained that Binance had intentionally violated the established rules.

Earlier, the exchange denied Reuters’ reporting of a claim that user funds and revenues were commingled in 2020 and 2021.