S.E.C. Accuses Binance of Mishandling Funds and Lying to Regulators
Last edited Mon Jun 5, 2023, 02:54 PM - Edit history (1)
Source: New York Times
The Securities and Exchange Commission on Monday accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds and lying to American regulators and investors about its operations, in a sweeping case that has the potential to remake the landscape of power and wealth within crypto.
The S.E.C.’s lawsuit was the second time this year that federal regulators have accused Binance of evading laws designed to protect investors in the United States. Regulators have long seen the exchange, which has said it does $65 billion in average daily trading volume, as a major target in their quest to bring to heel a crypto industry that has been built around an explicitly anti-government ethos.
In the 136-page complaint, the S.E.C. said Binance had mixed billions of dollars in customer funds and secretly sent them to a separate company, Merit Peak Limited, which is controlled by Binance’s founder, Changpeng Zhao.
The complaint also said Binance had misled investors about the adequacy of its systems to detect and control manipulative trading and about its efforts to restrict U.S. users from trading on its international platform. U.S.-based customers were supposed to have access only to an ostensibly separate company formed specifically to operate within the United States, called Binance.US. Binance and Mr. Zhao “enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk,” regulators said in the civil lawsuit, which was filed in Federal District Court in Washington.
Read more: https://www.nytimes.com/2023/06/05/business/sec-binance-charges.html
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The charges included misleading investors about the adequacy of its systems to detect and control manipulative trading and about its efforts to restrict U.S. investors from trading on its unregulated platform. Regulators said in the civil lawsuit, filed in Federal District Court in Washington, that Binance and Mr. Zhao "enriched themselves by billions of U.S. dollars while placing investors' assets at significant risk."
Regulators have long seen Binance as a major target in their quest to bring to heel an industry built around an explicitly anti-government ethos. In its court filing, the S.E.C. cited a 2018 email from Binance's chief compliance officer saying "we do not want [Binance.com] to be regulated ever." The charges against the biggest crypto exchange were the latest actions by U.S. regulators and prosecutors to rein in the Wild West of crypto trading and force major players in the space to come into compliance with U.S. laws.
Binance was already under increasing pressure. The Justice Department is investigating the exchange for money-laundering violations. Binance lost its outside auditing firm when Mazars announced that it would no longer do business with crypto companies late last year. The company has also seen its control of the crypto market shrink.
The charges included misleading investors about the adequacy of its systems to detect and control manipulative trading. Regulators also said Binance did not take sufficient steps to restrict U.S. investors from accessing Binance's unregulated exchange. The charges against the biggest crypto exchange were the latest actions by U.S. regulators and prosecutors to rein in the Wild West of crypto trading and force major players in the space to come into compliance with U.S. laws.
Binance was already under increasing pressure. The Justice Department is investigating the exchange for money-laundering violations. Binance lost its outside auditing firm when Mazars announced that it would no longer do business with crypto companies late last year. The company has also seen its control of the crypto market shrink.
To improve its reputation, Binance has hired a slew of new compliance officials, including a former federal prosecutor who now heads its compliance operation. "We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk," said Gurbir S. Grewal, director of the S.E.C.'s enforcement division.
Original article -
The Wall Street regulator said Binance had been mixing "billions of dollars" in customer funds and secretly sending them to a separate company controlled by Binance's founder, Changpeng Zhao. The charges included misleading investors about the adequacy of its systems to detect and control manipulative trading. Regulators also said Binance did not take sufficient steps to restrict U.S. investors from accessing Binance's unregulated exchange.
"We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk," said Gurbir S. Grewal, director of the S.E.C.'s enforcement division.
The nation's top securities regulator filed 13 charges against Binance and Mr. Zhao, better known in the crypto world as "C.Z." The S.E.C. is taking action a little over a month after the Commodities Futures Trading Commission filed its own civil enforcement action against Binance and Mr. Zhao.
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