The United States Securities and Exchange Commission filed a lawsuit against Binance along with its U.S. platform and CEO Changpeng Zhao on June 5 in a Washington, D.C. federal district court for allegedly violating securities laws and offering unregistered securities.
The U.S. regulator has accused the crypto exchange of offering unregistered securities in the form of its now-paused Binance USD (BUSD) stablecoin and its native token BNB (BNB). The SEC also deemed its Simple Earn and BNB Vault products and its staking program as violations of securities law.
The SEC further alleged that Binance.US and its legal company, BAM Trading, failed to register as an exchange, broker or clearing agency and named Zhao as a “controlling person.” Although Binance has maintained throughout that the global entity, as well as the U.S.-based crypto platforms, are independent, the lawsuit alleged that the funds from the Biance global platform and Binane.US were co-mingled on multiple occasions.
The suit also listed nine crypto tokens trading on the platform as securities — Solana (SOL), Cardano (ADA), Polygon (MATIC), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), Decentraland (MANA), Algorand (ALGO), Axie Infinity (AXS) and Coti (COTI).
The SEC lawsuit, which levies 13 charges against the crypto exchange, its U.S. entity and the CEO, came within weeks of a Reuters report alleging the exchange was comingling customer funds.
The report alleged that the crypto exchange mixed its corporate revenue with customer funds in 2020 and 2021 and that the commingling occurred on a daily basis.
Reuters cited three insiders with knowledge of the crypto exchange’s finances and further claimed that the majority of commingling had occurred on accounts held at now-bankrupt Silvergate Bank, with amounts reaching the billions of dollars.
The report also claimed that many of the Silvergate accounts involved in comingling were linked to Zhao. At the time, Binance had refuted the claims and called it a conspiracy theory, only for the SEC to include those accusations in their lawsuits just a few weeks later.
Binance refuted the accusations made by the SEC in the lawsuit in a blog post and claimed that the onus falls on the SEC for not offering any clear regulatory guidelines for crypto platforms in the United States.
The SEC lawsuit also came within months of another lawsuit against the crypto exchange and CEO Zhao by the United States Commodity Futures Trading Commission on March 27….
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