- Binance diverted customers funds to Sigma Chain
- The exchange will dispute the charges
- Crypto traders lost $320 million from liquidations on the news
Binance and its CEO CZ are accused of making billions while “placing investor assets at significant risk”, The Guardian wrote. The US Securities and Exchange Commission (SEC) claims the exchange commingled billions in customer funds and sent the money to a different company controlled by CZ.
Binance made $11B+ in 3 years
According to a court filing, Binance and CZ enriched themselves unlawfully. Between June 2018 and July 2021, the exchange’s revenue reached $12 billion. Transaction fees mainly generated this amount.
CZ, Binance, BAM Trading Services, and BAM Management US Holdings face 13 charges, as Bankless Times reported yesterday. According to the SEC, Binance and BAM ran Binance.US, which was created in 2019 for US customers. At the time, Binance announced it was quitting the US market.
Secret control
Allegedly, Binance.US was not independent of the main trading platform. Binance and its CEO secretly controlled it. They mixed and diverted customers' funds to the entity Sigma Chain, which CZ operated.
The SEC claims Sigma inflated transaction volume on the US platform artificially via “manipulative trading.” CZ has also been accused of hiding the access of high-value US customers to Binance.
Binance: Allegations are unjustified
A Binance spokesperson commented, as quoted by The Guardian:
We want to be clear that while we take the allegations in the SEC’s complaint seriously, they should not be the subject of an SEC enforcement action, let alone on an expedited basis. They are unjustified.
Expert: SEC is “incredibly aggressive”
Ex-senior SEC official John Stark has said his former employer has been “incredibly aggressive” towards crypto. Since last year, the SEC has initiated over two dozen crypto-related enforcement actions. The watchdog alleges that Binance purposefully acted in a way to avoid regulatory scrutiny.
Red across the board
According to market experts, the SEC’s lawsuit will have a significantly adverse impact on the crypto industry. CZ’s exchange dominated global crypto trading. In 2022, it processed transactions worth about $65 billion a day.
Bitcoin is down 3.81% and Binance Coin (BNB) is down 7.67% in the last 24 hours, Coinmarketcap data show. According to CoinGlass data, crypto traders lost $320 million from liquidations in this same period. $289 million of long positions were obliterated after the news of the lawsuit broke on Monday.
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