The US Securities and Exchange Commission claimed in a lawsuit filed in a US federal court that the company violated regulations by mismanaging funds and lying to regulators.
The primary regulator on Wall Street reportedly charged Binance Holdings Ltd., the world’s biggest cryptocurrency exchange, and its CEO, Changpeng Zhao violating US securities laws, which marked a significant uptick in the cryptocurrency exchange’s legal problems.
All Cryptocurrencies plunged after the US SEC charged Binance Holdings Ltd. for violating the rules enacted for investor protection by running unregistered trade, providing false information about trading controls, and selling unlisted securities, among other offenses.
Accusations in the complaint against Binance
In the complaint, the Securities and Exchange Commission listed 13 allegations involving platforms and other investment companies that founder Changpeng Zhao controlled.
Zhao and Binance stated in public that US consumers were not permitted to transact on Binance.com, but the SEC claimed that the platform “secretly” let high-value customers continue trading. Zhao argued that Binance.US was separate from Binance but was “secretly controlled” by it “behind the scenes,” as per the complaint.
The SEC’s proceeding occurred for the second time this year following the accusations made in March by the Commodities Futures and Exchange Commission, another US body. At the time, the exchange and Zhao stood by their compliance efforts, termed the Commodities Futures Trading Commission’s lawsuit disappointing, and declared to continue dealing with authorities.
Regulators claimed in the civil case submitted to the Federal District Court in Washington that Binance and Mr. Zhao have enriched themselves by billions of dollars while placing investors’ assets at significant risk. The violations are altogether called “calculated evasion of law” and “extensive web of deception.”
Additionally, according to the SEC, Zhao and Binance “commingled” customer assets with another Zhao-controlled company called Signa Chain, engaging in manipulative trading that artificially inflated the platform’s trading volume, according to agency.
The executives of the company stated they had been attempting to settle with the authorities and were disappointed and disheartened by the SEC’s decision to pursue legal action. The business alleged that the case represented a “misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry,” including that it would fight back “vigorously.”
Additionally, according to the company, the SEC hurried to bring the complaint, even though the business received “a new set of 26 document requests” from authorities last week.
The SEC also claimed in the lawsuit that several tokens traded on Binance.com and Binance.US were offered and sold as securities, including Solana, Cardano, Polygon, Filecoin, Cosmos, Sandbox, Decentraland, Algorand, Axie Infinity, and COTI. This allegation could have significant repercussions for other exchanges that offer these tokens.
Solana sank up to 13%, Cardano declined 8%, Polygon fell 6%, and Filecoin dropped 10%. The price of Bitcoin dropped as much as 6.7% to $25,415, the lowest level since April. The native currency of the ecosystem of the largest digital asset exchange in the world, Binance Coin, fell as much as 13%.
According to estimates from CoinMarketCap, Bitcoin represents about 50% of the $1.2 trillion cryptocurrency market. The fourth-largest coin by market cap is Binance Coin, which has a value of almost $43 billion. About 50% of all cryptocurrency trading volume is handled by the company.
According to tracker Coinglass data, traders who were mostly betting on higher prices liquidated over $250 million worth of trading positions over the last four hours.
The SEC has taken the stance that the majority of cryptocurrency tokens issued by exchanges like Binance and FTX should be regarded as securities terms of federal securities law.