![]() Funds from that entity were then transferred to a third party and then appeared to be used to buy and sell crypto, the SEC said. Billions of dollars of those funds went to a bank account for an entity called Merit Peak Limited that was controlled by Zhao. The regulator said that Binance moved and mixed customer funds improperly. “The supposed controls were virtually non-existent,” the lawsuit said, alleging that from at least September 2019 until June 2022, Sigma Chain - a trading firm owned and controlled by Zhao - used wash trading to artificially inflate Binance.US’s trading volume. In addition, the agency accused Binance of misleading investors about controls in place at the US entity to prevent manipulative trading. investor capital at risk and at Binance’s and Zhao’s mercy.” customers put the safety of billions of dollars of U.S. regulatory oversight while simultaneously providing securities-related services to U.S. Meanwhile, the SEC also alleged that the “purposeful efforts to evade U.S. regulatory tug-of-war,” the company said in a statement.ĮXPLAINER: Why Crypto Flinches When SEC Calls Coins Securities Alleged Wash Trading “Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a U.S. ![]() The derivatives regulator also alleged that Binance worked to evade US regulations, a claim that the SEC repeated in its Monday complaint.īinance said other regulatory action motivated the SEC. At the time, the exchange and Zhao defended their compliance efforts and called the lawsuit by the Commodity Futures Trading Commission disappointing, while also pledging to keep working with regulators. ![]() The case follows a lawsuit from the US derivatives watchdog in March that alleges Binance and Zhao routinely broke its rules. Since August 2021, Binance didn’t require clients with account withdrawal limitations to submit any know-your-customer information when opening accounts, allowing them to bypass anti-money laundering restrictions, the SEC said. investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes,” the SEC said. ![]() “While Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. The SEC alleged that Binance and its US affiliate weren’t actually independent from each other and improperly functioned as an exchange, broker-dealer, and clearing agency without registering with the agency. “We intend to defend our platform vigorously.”Īfter the case was announced, Bitcoin fell by as much as 6.7%, the steepest decline in almost three months.Īmong other allegations, the SEC said that two Binance-linked tokens, BNB and BUSD, were securities that the firm improperly offered and sold. “While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis,” the firm said. The exchange also said that the SEC was misguided in not providing clarity over rules for digital assets. The regulator asked that the court freeze Binance assets and appoint a receiver, a request typically reserved for cases in which the SEC fears company property may be lost or concealed.īinance called the complaint “disappointing,” saying it had engaged with the SEC in good-faith negotiations to settle the matter. “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.” “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 in a statement. It’s just the latest legal headache for Zhao and Binance. For years, they flouted basic know-your-customer rules by letting Americans improperly open accounts and trade, the watchdog said. In a 136-pagecomplaint filed Monday in US federal court in Washington, the SEC laid out a range of alleged violations against the world’s biggest crypto exchange and its leader. and its Chief Executive Officer Changpeng Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules. The US Securities and Exchange Commission accused Binance Holdings Ltd.
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