- Binance.US and CZ sold unregistered securities in the form of BUSD and BNB
- Binance didn't register as a clearing agency, an exchange, or a broker
- CZ controlled Binance.US behind the scenes
The US Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, the world’s leading crypto exchange, and its founder and CEO Changpeng "CZ" Zhao. Allegedly, the exchange violated several federal securities laws, CoinDesk reported.
Unregistered securities, covert control
Allegedly Binance, its US arm Binance.US and CZ sold unregistered securities in the form of the stablecoin BUSD and the Binance Coin (BNB) token. The regulator also accused the exchange that its staking service violated securities laws.
Other accusations include failing to register as a clearing agency, an exchange, and a broker. The watchdog also alleged that CZ controlled Binance.US behind the scenes and that an entity he owned was inflating the US arm’s trading volume.
In addition, Binance admitted US-based individuals to its platform, although it wasn’t allowed to. The lawsuit states:
Zhao consistently claimed to the public that the Binance.com platform did not serve US persons, while simultaneously concealing efforts to ensure that the most valuable US customers continued trading on the platform. Zhao directed Binance to assist certain high-value US customers in circumventing controls because Binance did not want to be held accountable for these actions.
According to SEC chair Gary Gensler, Binance and its CEO “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law." The defendants face 13 charges.
CFTC takes aim at Binance
In April this year, Bankless Times reported that the Commodity Futures Trading Commission (CFTC) accused Binance of “sham” compliance with US derivatives regulations. The regulator alleges that Binance did not register with it and signed up American users despite promising not to do so.
CZ was the last to know
CZ and Binance haven’t commented officially, but CZ tweeted:
Our team are all standing by, ensuring systems are stable, including withdrawals and deposits. We will issue a response once we see the complaint. Haven't seen it yet. Media gets the info before we do.
Contributors
