6-6-2023 (WASHINGTON) Binance, the world’s largest cryptocurrency exchange, along with its CEO and founder Changpeng Zhao, is facing a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) on Monday. The SEC alleges that Binance failed to restrict U.S. customers from its platform, provided misleading information to investors about its market surveillance controls, and operated an unregistered securities exchange.
The complaint, filed in federal court in Washington, D.C., also claims that Binance and Zhao had secret control over customers’ assets, allowing them to mix and divert customer funds. Additionally, it is alleged that Binance created separate entities in the United States as part of a scheme to evade U.S. federal securities laws.
At the time of writing, Binance has not yet responded to the charges. Changpeng Zhao took to Twitter to announce that the company would issue a response once it had reviewed the complaint.
This legal action adds to Binance’s ongoing legal troubles, as the company was previously sued by the U.S. Commodity Futures Trading Commission (CFTC) in March. The CFTC accused Binance of operating an “illegal” exchange and having a “sham” compliance program. Changpeng Zhao referred to these charges as “disappointing” and claimed that they provided an incomplete representation of the facts.
Furthermore, Binance is currently under investigation by the Justice Department for suspected violations related to money laundering and sanctions.
Founded in Shanghai in 2017 by CEO Changpeng Zhao, who is a Canadian citizen with Chinese heritage, Binance has grown to become the world’s largest cryptocurrency exchange. While its holding company is based in the Cayman Islands, Binance has not disclosed the location of its main Binance.com exchange.
Binance’s global trading platform, Binance.com, dominates the cryptocurrency trading landscape. In 2022, it processed trades worth approximately $65 billion daily, accounting for up to 70% of the market.
Previous reports by Reuters have also revealed that Binance processed at least $10 billion in payments for both criminals and companies attempting to evade U.S. sanctions. Moreover, it was reported that Binance commingled customer funds with corporate revenues in violation of U.S. financial regulations, which require the segregation of client money.
Binance has denied the allegations of mixing customer deposits with company funds, asserting that users who sent money to the specified account were purchasing Binance’s dollar-linked crypto token rather than making deposits.
