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The SEC claims Binance and its CEO evaded the law, failed to disclose certain details to investors and have been secretly operating the US trading platform from behind the scenes.
Binance, the world’s largest crypto exchange, has been hit with 13 separate charges by a US regulator for alleged securities law violations.
The list of charges by the Securities and Exchange Commission (SEC) are extensive. One of the top accusations from the SEC is that Binance and its founder Changpeng Zhao let high-value US customers continue trading on the Binance.com platform, despite public claims that US customers were restricted.
The US commission also claims that Zhao and Binance secretly controlled its US trading platform – Binance US – from behind the scenes, while publicly claiming it was a separate and independent platform.
The SEC also accused Binance of sending billions of dollars’ worth of investor assets to a third party company, Merit Peak Limited, which the SEC said is also owned by Zhao.
SEC chair Gary Gensler said the 13 charges allege that Zhao and Binance engaged in “an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law”.
“As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied,” Gensler said.
“The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
Binance has responded by saying it intends to “defend our platform vigorously” and said any allegation that user assets on the Binance US platform “have ever been at risk are simply wrong”.
“The SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators – and investors do not appear to be the SEC’s priority,” the company said in a statement.
“Because of our size and global name recognition, Binance is an easy target now caught in the middle of a US regulatory tug-of-war.
The SEC has had issued with multiple crypto exchanges in recent months. In April, the US agency accused Bittrex of operating as an “unregistered national securities exchange, broker and clearing agency”.
Crypto exchange Coinbase took legal action against the SEC in April, compelling the regulator to create clearer rules regarding crypto securities. Last month, the SEC asked a judge to deny Coinbase’s request to compel the agency to respond, Bloomberg reports.
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