​SEC accuses Binance of multiple violations of US laws. What the exchange responded

What’s new? On June 5, the US Securities and Exchange Commission (SEC) filed 13 charges against crypto exchange Binance, its US arm Binance.US, and personally against the companies’ founder Changpeng Zhao (CZ). The charges include operating unregistered exchanges, broker-dealers, and clearing agencies, misrepresenting the control and oversight of trading on the Binance.US platform, and unregistered offers and sales of securities.

The full version of the SEC’s press release

Charge details. According to the Commission, despite Binance.com’s ban on transactions for US customers, Zhao and Binance secretly allowed wealthy US users to continue trading on the platform. The SEC also alleges that Zhao and Binance commingled users’ assets or diverted them as they saw fit, including Zhao-owned Merit Peak Limited and Sigma Chain. The latter, meanwhile, engaged in manipulative trading by artificially inflating trading volumes on the platform.

The SEC’s lawsuit also alleges violations of key provisions of federal securities laws. The agency points to the unregistered sale of Binance’s own crypto assets, including the exchange token BNB and BUSD stablecoin, as well as a number of crypto lending and staking products.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said that the defendants knowingly avoided complying with local laws, putting investors and customers at risk in order to maximize profits.

“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 […] The public should beware of investing any of their hard-earned assets with or on these unlawful platforms,” SEC Chairman Gary Gensler added.

Binance comments. Representatives of the exchange published a detailed response in which they rejected all the accusations of the Commission. The platform has spoken out against the abuses of the SEC and said it is ready to fight them within the law. Binance said that users’ assets were not at risk and were perfectly safe and that the SEC’s actions undermine the United States’ role as a global center of financial innovation and leadership.

In March, the US Commodity Futures Trading Commission (CFTC) also filed a lawsuit against Binance, accusing the exchange and Zhao of allowing American customers on the global platform to maximize their own profits. Zhao called the lawsuit “unexpected and disappointing,” given that the platform had been working with the CFTC for more than two years.

The exchange’s officials also noted in a new statement about the SEC’s lawsuit that they had worked with the regulator to address its concerns. The company called its refusal to engage with Binance and its attempt to resolve the claims through court enforcement “just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry.”

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Zhao himself also reacted to Gensler’s Twitter post about the charges against the exchange. “Wonder if he ever reads the comments under his post, from the consumers he is suppose to protect,” the chief of Binance wondered, referring to the sharply negative reaction to the lawsuit from members of the crypto community.

Wonder if he ever reads the comments under his post, from the consumers he is suppose to protect. https://t.co/xQjC872GsD — CZ 🔶 Binance (@cz_binance) June" class="redactor-linkify-object">https://twitter.com/cz_binance/status/166581759122... 5, 2023

After the CFTC lawsuit, reporters reported that Zhao was planning to cut his stake in Binance.US amid heavy scrutiny from federal regulators. The move was seen as a way to improve the company’s reputation in the United States.