SEC Charges Binance, Founder With Securities Violations

SEC Charges Binance, Founder With Securities Violations

The Securities and Exchange Commission charged cryptocurrency exchange Binance and its founder, Changpeng “C.Z.” Zhao, with a range of securities violations, in a landmark move against the industry’s most influential individual. The SEC wants a federal judge to freeze Binance’s assets and appoint a receiver.

• The SEC said that while Binance publicly claimed U.S. customers were restricted from its core overseas trading venue, controls were bent to allow high-value customers access. Binance.US. was positioned as an independent, U.S.-based platform, but the agency said Binance and Zhao secretly controlled it.
• The SEC accused Binance and Zhao of mishandling customer money, misleading investors and regulators, and violating securities rules. Binance released a lengthy statement saying it intends to defend its platform “vigorously.” Binance said it cooperated with the SEC and the charges are unjustified.
• The agency also claims that Binance exercises control of assets held on its platform, “permitting them to commingle customer assets or divert customer assets as they please, including to an entity Zhao owned,” and that this has been concealed.
• The price of Bitcoin shed 6% to trade near $25,500 on Monday. Binance coin BNB fell more than 10%, to $275.22, according to CoinDesk. Shares in Coinbase Global, a U.S. crypto exchange, fell 10.5%. The SEC warned Coinbase about potential charges in March.

What’s Next: The case adds to Binance’s legal challenges. The Commodity Futures Trading Commission sued in March, saying Binance and Zhao evaded its derivatives platform rules, and the exchange also faces a Justice Department investigation over its program to detect money laundering, The Wall Street Journal reported.

—Jack Denton and Janet H. Cho from Barrons