The US Securities and Exchange Commission (SEC) has recently charged Binance Holdings Ltd. and its US affiliates with multiple offenses. This comes after separate charges were filed by another US regulator, pointing to the growing regulatory pressure the world’s largest crypto exchange is facing.
The SEC alleges that the defendants have blatantly disregarded federal securities laws, consequently enriching themselves by billions of US dollars while placing investors’ assets at significant risk. Binance and its founder, Zhao Changpeng, also known as CZ, are accused of engaging in multiple unregistered offers and sales of crypto asset securities and other investment schemes. In total, the exchange and CZ face 13 charges.
According to SEC Chair Gary Gensler, the defendants misled investors about their risk controls and corrupted trading volumes. They also actively concealed information such as who was operating the platform, the manipulative trading of its affiliated market maker, and the location and custody of investor funds and crypto assets. The SEC further claims that Binance and BAM Trading, operating as Binance.US under Zhao’s leadership, were unlawfully functioning as an exchange, broker-dealer, and clearing agency without any registration.
The defendants’ decision not to register, according to the SEC, allowed them to evade the critical regulatory oversight intended to protect investors and markets. In a notable statement, the agency also deemed two cryptocurrencies, BNB and BUSD, as securities.
These recent charges highlight the mounting pressure that Binance is experiencing from multiple regulators. In March, the US Commodity Futures Trading Commission (CFTC) accused the crypto exchange of allowing US-based trading firms to trade crypto derivatives on Binance’s international exchange. This 74-page complaint also asserts that some of Binance’s entities had “commingled funds” and that CZ had directed employees and customers to bypass compliance controls in order to maximize corporate profits.
As the regulatory landscape evolves, it is evident that exchanges and related parties must adapt their practices or face consequences. While some argue that increased regulations could hinder innovation in the crypto space, others maintain that adhering to legal principles is indispensable to ensure the safety and stability of the market. As the debate continues, it remains to be seen how industry leaders like Binance will react to these challenges and what path they will choose to tread in the future.