​SEC chair compares the business models of Binance and the bankrupt FTX

What’s new? US Securities and Exchange Commission (SEC) Chair Gary Gensler has hinted at parallels between the operations of crypto exchanges Binance and the bankrupt FTX, namely the alleged use of customer funds and mixing them with their own. In comments to Bloomberg, he pointed to the existence of a business model that the SEC does not allow “elsewhere, in finance.” On June 5, the regulator filed the lawsuit against Binance, making a total of 13 charges.

Bloomberg’s material

What else is known? One of the SEC’s charges states that funds from Binance and Binance.US were commingled into an account controlled by Merit Peak, a company affiliated with Changpeng Zhao, the exchanges’ founder.

The SEC also said that Binance.US engaged in wash trading to inflate trading volumes through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is also owned by Zhao. “Platform after platform, entrepreneurs [...] are trying to build wealth for themselves and their investors through sister organizations — hedge funds — trading against the customers,” Gensler noted.

Wash trading is the repeated buying and selling of the same asset over a short period of time in order to mislead other market participants about its price or liquidity.

Zhao commented on Gensler's statement about the parallels between Binance and FTX, noting that the SEC did not sue the latter.

They didn't sue FTX. https://t.co/FVgi5l6VcI — CZ 🔶 Binance (@cz_binance) June 6, 2023

Ripple payment protocol CEO Brad Garlinghouse said that the string of lawsuits is an attempt by the SEC to “distract from the agency’s FTX debacle.” The litigation between the SEC and Ripple over trading in unregistered securities has been dragging on since 2020.

If it wasn’t already clear, it should be now – Chair Gensler’s laughable “pro-innovation” stance (as he said today), is exactly the opposite. What this also tells me is that the SEC is throwing lawsuits at the wall and hoping they distract from the agency’s FTX debacle. — Brad Garlinghouse (@bgarlinghouse) June 6, 2023

Some members of the crypto community have suggested that FTX’s significant donations to political parties and the past lobbying activities of its CEO Sam Bankman-Fried in Washington could also be the reason for the lack of a lawsuit from the regulator.

Why didn't the SEC sue FTX?Oh that's right they allowed public servants to take *donations* and colluded with them to further oppress Americans https://t.co/EgKhB99e46 — Wendy O (@CryptoWendyO) June 6, 2023

Meanwhile, Markus Thielen, the head of research and strategy at Matrixport, spoke to Cointelegraph and explained that cryptocurrencies were not seen as a serious threat to US financial stability before the FTX collapse. The collapse of three major banks this year proved otherwise, he noted.

Thielen also believes that there is a notion of “embarrassment” for those who did not foresee problems with FTX, including lawmakers, who have to work doubly hard to distance themselves from it.

Republican Party will examine the SEC’s ties to the FTX exchange

The head of the regulator, Gary Gensler, was required to provide materials on the FTX case by February 24

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Gensler also commented on the Commission’s lawsuits against Binance and Coinbase, saying the platforms were combining several functions at once, which is unacceptable in the traditional finance sector. He also hinted that cryptocurrencies are essentially unnecessary in today’s world.