SEC Sues Crypto Exchange Binance and CEO Zhao

June 08, 2023

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On June 5, the SEC brought over a dozen charges in the District Court of Columbia against Binance, its US platform, and CEO Changpeng Zhao (CZ), alleging that the agency referred to a “blatant disregard” for American law.

Binance Under the US SEC’s Crosshairs

The regulator claimed in a 136-page complaint that Binance, Binance.US, and Zhao operated unregistered US financial companies, misled investors about the companies’ risk management practises, inflated trading volumes, and transformed and sent “billions of dollars of investor assets” to an external entity managed by Zhao.

The SEC also claims that the firm didn’t register its Binance.com platform as a trading platform or broker-dealer clearing agency in the lawsuit.

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CZ Referred to as a ‘Controlling Person’

In addition, the CZ was referred to as a “controlling person.” As per the statement given by SEC Chair Gary Gensler: “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”

“Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk. […] Defendants have engaged in multiple unregistered offers and sales of crypto asset securities and other investment schemes,” the lawsuit reads.

Investors are not SEC’s Top Priority

Binance.US responded through a tweet. According to the platform, the accusations are the “latest example of regulation by enforcement.” The company noted in a blog post on Binance.com that, “The SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators — and investors do not appear to be the SEC’s priority.”

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CFTC has also Issued a Notice to Binance

A US regulator has recently issued a warning against Binance for intentionally disregarding regulations. Binance Holdings and its CEO Changpeng Zhao “CZ” were given a notice by the Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam for violating US regulations.

However, Changpeng ‘CZ’ Zhao’s response had emphasized the company’s commitment to go by all laws and regulations in the nations where it operates. The DOJ is also investigating the firm for supposed breaches of sanctions imposed on Russia.