SEC sues CZ and Binance for multiple securities violations

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The largest crypto exchange Binance and its CEO Changpeng Zhao are now being sued by another U.S. regulator, SEC, for multiple securities violations. Three months ago, CFTC filed a lawsuit against Binance for alleged market manipulation.

On June 5, SEC pressed 13 charges against Binance, including offering unregistered securities, BNB and BUSD tokens. SEC has also made allegations against Binance’s staking service, claiming that it violates securities law. Parallel charges have been brought against BAM Trading, the company that operates Binance.US, and against Binance itself. These include that Binance isn’t registered as a clearing agency, broker or exchange. In addition, SEC is concerned about Binance’s practice of merging customer funds. They also suspect that CZ, the founder of Binance, covertly controlled Binance.US. Finally, a company allegedly owned and managed by CZ is accused of artificially inflating Binance.US’s trading volume.

The allegations of commingling user funds through CZ’s controlled account Merit Peak Limited, made by the SEC, echo the CFTC complaint. After it came to light, Binance’s CEO denied the allegations in a detailed blog post.

As of the SEC’s lawsuit, Binance said in a blog post that they’re disappointed with the suit brought by SEC:

From the start, we have actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns. Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations. But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate. We are disheartened by that choice.

Some prominent crypto community members made comments on the suit, perceiving it not just like the move against the exchange, but the entire crypto industry:

With respect to Binance, I'm reading through the SEC complaint. It's over 130 pages, but seems like the next in a series of steps to implement chokepoint 2.0 in the United States. The end goal is a agenda based CBDC partnered with a handful of massive banks and end-to-end control…

— Charles Hoskinson (@IOHK_Charles) June 5, 2023

This conclusion wasn’t drawn without reason, as SEC has designated several prominent cryptocurrencies as securities: Binance (BUSD and BNB), Solana (SOL), Cardano (ADA), Polygon (MATIC), Coti (COTI), Algorand (ALGO), Filecoin network (FIL), Cosmos (ATOM), Sandbox platform (SAND), Axie infinity (AXS) and Decentraland (MANA).

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