US regulator sues crypto exchange Binance for violating laws
The largest cryptocurrency exchange platform, Binance, is facing legal action from the United States Securities and Exchange Commission (SEC). On Monday, the SEC accused Binance of illegally conducting financial transactions and providing services without the necessary authorizations.
Changpeng Zhao, co-founder and chief executive of Binance, has been accused of fraud, conflict of interest, among other allegations.
The SEC tweeted about its decision to file charges against Binance Holdings Ltd. (Binance), US-based independent affiliate BAM Trading Services Inc., and its founder Changpeng Zhao, with a variety of securities law violations.
In the tweet, the regulator shared a seemingly incriminating quote from CCO Noah Perlman to another Binance compliance officer in December 2018. “We are operating as an unlicensed exchange in the US, bro,” he said.
The agency accused Zhao of secretly controlling Binance.US as part of a “web of deceit” to circumvent laws and said that until at least December 2020, Binance.US staff had “no ability to control” bank accounts from the company.
Zhao and Binance publicly claimed that US customers were blocked from transacting on Binance.com, but the platform “secretly” allowed high-value customers to continue trading, the SEC said.
What the records say
According to an exclusive report by the Reuters news agency, bank records reveal that Guangying Chen, a senior executive at Binance, was the main operator of five bank accounts associated with Binance.US – the US affiliate of the cryptocurrency exchange.
These accounts, including one with US customer funds, were authorized for operation by US lender Silvergate Bank in 2019 and 2020, according to records.
This authorization granted Chen and his team the ability to transfer funds into these bank accounts. Communication within the company indicates that Binance.US employees had to get approval from Chen’s team for even basic financial transactions, such as covering the company’s payroll.
These newly revealed details shed light on the extent of Binance’s control over Binance.US, despite claims by both entities that they operated independently.
The previously undisclosed bank records and messages demonstrate how Binance management exerted influence over the US affiliate’s financial affairs by utilizing its access to Silvergate bank accounts.
What the SEC Found
SEC Chairman Gary Gensler stated that through thirteen indictments, they uncovered an extensive pattern of fraud, conflicts of interest, lack of transparency, and deliberate evasion of the law by Zhao and Binance entities. According to the SEC, investors were misled regarding risk controls and trading volumes.
Gurbir Grewal, Director of the SEC’s Enforcement Division, added: “We assert that Zhao and the Binance entities were not only aware of regulatory requirements, but also intentionally chose to ignore them, harming their customers and investors, all in pursuit of maximizing their own profits”.
Following the announcement, major cryptocurrencies such as Bitcoin and Ether saw significant declines.
Binance.US Spokesman Christian Hertenstein said that since the company’s current chief executive Brian Shroder took over in late 2021, “no one other than Binance.US employees has had control or access to Binance accounts .US”.
This legal action comes after years of investigation by US authorities. In March, the Commodity Futures Trading Commission (CFTC) had already filed a lawsuit against Binance for violation of rules in the US market.
Source: DW
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.