The US Securities and Exchange Commission (SEC) has recently raised serious allegations against the Binance empire and its founder Changpeng Zhao. The SEC claims that Binance CCO admitted to operating as an unlicensed securities exchange within the USA. According to the accusations, Binance and Zhao knowingly functioned as an illegal, unregistered US Securities business while avoiding investor and market protection laws. The SEC Chief, Gary Gensler, went as far as tweeting that Zhao and Binance entities allegedly engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and a calculated evasion of the law.
The SEC lawsuit delves into the evasion tactics utilized by Zhao and Binance, explaining how they created BAM Management and BAM Trading in the United States. These entities claimed they independently operated the Binance.US platform, but the SEC found that Zhao and Binance directly controlled the US operations of BAM Trading and maintained the Binance.US platform’s crypto asset services. BAM Trading employees reportedly referred to Zhao’s and Binance’s control over the operations as “shackles”, with the former CEO alleging that her team felt “duped into being a puppet”.
To further illustrate Zhao’s control, the SEC lawsuit points out his ownership of another firm, Merit Peak Limited. Registered in the British Virgin Islands, Zhao serves as Merit Peak’s beneficial owner and oversees operations with the help of several Binance employees. The SEC claims that Zhao directed more than $16 million to BAM Management via Merit Peak, thereby funding the operations of the Binance.US platform.
These recent revelations of Binance’s operations are eerily similar to the now-defunct FTX exchange. Like Sam Bankman-Fried’s operations with Alameda Research as a prop trading and market-making entity, Zhao controlled BAM Management, Sigma Chain, and Merit Peak. BAM Management US Holdings Inc, which is different from BAM Holdings Limited, received partial capitalization from US investors.
The allegations against Binance could lead to serious consequences if proven true. Binance may face sanctions and heavy penalties that could potentially crumble Zhao’s empire. These recent events shed light on the need for increased scrutiny and regulatory oversight of the cryptocurrency industry to protect investors and maintain a credible market. However, it is essential for investors to stay well-informed and conduct thorough market research before entering the volatile world of cryptocurrencies, taking personal responsibility for financial decisions.
Source: Coingape
