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SEC Files Lawsuit Against Binance and Changpeng Zhao
The US Securities and Exchange Commission (SEC) has taken legal action against Binance, a prominent bitcoin exchange, and its CEO Changpeng Zhao. The lawsuit, comprising 13 allegations, accuses Binance of engaging in unregistered offerings and sales of BNB and BUSD tokens, as well as promoting products like Simple Earn and BNB Vault without proper registration. Additionally, the SEC claims that Binance failed to register its Binance.com platform as an exchange, broker-dealer, or clearing agency, including its US division. The lawsuit also names Zhao as a “controlling person” within the company.
The SEC further classifies SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, and AXS as securities. According to the lawsuit, Binance unlawfully solicited US investors to trade these crypto-assets on unregistered trading platforms hosted on Binance.com and Binance.US. The SEC alleges that Zhao and Binance had control over clients’ assets, manipulating and redirecting them at their own discretion. SEC Chairman Gary Gensler criticized their attempt to bypass US securities laws through fictitious controls, highlighting their disregard for regulatory compliance.
As a response to the SEC’s lawsuit, Binance expressed disappointment with the decision, emphasizing its commitment to defending its business. The exchange considered the SEC’s departure from constructive engagement as a deliberate failure to provide regulatory clarity. In March, the Commodities Futures Trading Commission (CFTC) also filed a lawsuit against Binance and Zhao, accusing them of operating without proper registration and intentionally evading US laws regarding derivative trading. Zhao refuted the allegations, stating that the SEC’s claims were incomplete and disagreed with their characterization of several points.
Amidst the legal proceedings, the price of BNB, Binance’s native token, dropped from approximately $300 to around $280. This decline of 7.7% occurred within a day. It is worth noting that in a now-deleted tweet, Zhao responded to the news with the number “4,” which signifies “ignore FUD (fear, uncertainty, and doubt) and fake news.” Binance assured its users of the stability of its systems, including withdrawals and deposits, while asserting its determination to address the legal challenges it faces.