The world’s largest cryptocurrency exchange Binance and its founder Changpeng Zhao are accused of misusing investor funds, operating as an unregistered exchange and violating a slew of U.S. securities laws in a lawsuit filed by the SEC. Filed in the U.S. District Court for the District of Columbia, the Securities and Exchange Commission lawsuit on Monday lists thirteen charges against the firm — including commingling and divert customer assets to an entity Zhao owned called Sigma Chain.
Binance is a Cayman Islands limited liability company founded by Zhao and the charges are familiar to practices uncovered after the collapse of the second largest cryptocurrency exchange, FTX, last year. The lawsuit lays out the extent to which the firms owners knew of the alleged legal violations: “Binance’s CCO bluntly admitted to another Binance compliance officer in December 2018, “we are operating as a fking unlicensed securities exchange in the USA bro.”SEC Chair Gary Gensler in a written statement that Zhao and Binance “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms,” Gensler said.
In a social media post, Binance said that it has been cooperating with the SEC’s The lawsuit comes roughly eight months after the collapse of FTX, which was also accused of co-mingling customers’ funds and investing the proceeds in high-risk investments that customers were unaware they were participating in. In December, US prosecutors and the SEC indicted FTX founder Sam Bankman-Fried on various money laundering, fraud and securities fraud charges.
His criminal trial is scheduled for this fall. “The SEC’s new indictment against Binance is a long list of indictments that make the exact same allegations that many in the Bitcoin and cryptocurrency community have made against Cho Changpeng and his company over the years. Binance’s practices were essentially an open secret, so this allegation shouldn’t surprise anyone working in the space,” said Bitcoin financial services firm Swann Bitcoin CEO Corey. Mr Kripsten said.
U.S. regulators have pursued Binance before. In March, the Commodity Futures Trading Commission accused Binance and Zhao of numerous CTFC violations and filed an enforcement action in the U.S. District Court for the Northern District of Illinois. The complaint also alleges that Samuel Lim, Binance’s former Chief Compliance Officer, abetted and abetted Binance’s violations. However, an investigation found that the authorities “acted unilaterally and decided to proceed with the case.”
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