The United States Securities and Exchange Commission (SEC) has accused Binance and its founder Changpeng Zhao of violating securities laws and operating an “extensive web of deception.”
Key details: Zhao and his company are facing 13 charges in a lawsuit filed by the SEC in the U.S. District Court in Washington, D.C., on Monday. Some of these charges include operating unregistered exchanges and oversight on the Binance.US platform.
The SEC alleged that Zhao and Binance are controlling Binance.US behind the scenes despite publicly claiming that the U.S. platform was created as a “separate, independent trading platform for U.S. investors.”
In one of the charges, the SEC alleged that Zhao purportedly misused the investors’ funds by commingling and diverting their assets to Sigma Chain, an entity he created.
Unregistered operation: Binance and BAM Trading were also charged with registration-related provisions, such as “operating unregistered national securities exchanges, broker-dealers and clearing agencies.”
“Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said in the lawsuit.
This lawsuit comes on the heels of another one Zhao faced in March for allegedly operating an “illegal” exchange and a “sham” compliance program.
Binance responds: In a statement on Monday, Binance wrote that it is “disheartened” by the SEC’s choice to “act unilaterally and litigate” amid their discussions.
“While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis,” Binance said, adding that they “intend to defend our platform vigorously.”
“Because Binance is not a U.S. exchange, the SEC’s actions are limited in reach,” Binance added.
About Binance’s founder: Born in China, Zhao, also known as “CZ,” moved to Canada with his mother on Aug. 6, 1989. Zhao launched Binance a few weeks before the Chinese government banned cryptocurrency exchanges in September 2017.
This new lawsuit Zhao faced in March for allegedly operating an “illegal” exchange and a “sham” compliance program.