The U.S. Securities and Exchange Commission (SEC) has recently targeted two major crypto brands, Binance and Coinbase, with lawsuits containing severe allegations. SEC Chairman Gary Gensler accuses Binance of operating through a “web of deception,” led by CEO Changpeng Zhao, and commingling customer funds. The SEC’s accusations against Coinbase, however, focus on the company acting as an unlicensed securities exchange and prioritizing profits over investors’ interests.
While both lawsuits are serious, the complaint against Binance is particularly damning as it directly implicates the company’s CEO, carrying a heavier weight of allegations. According to attorney Federica Pantana, Binance may face more significant consequences due to the severity of the charges. The case against Binance includes allegations reminiscent of the disgraced former competitor, FTX, though it is crucial to note that Binance and Zhao have not faced any criminal charges thus far.
As for Coinbase, the SEC claims the company operated as an unregistered national securities exchange, broker, and clearing agency and offered unregistered securities through its staking service. The commingling accusation leveled against Coinbase refers to functions rather than funds.
Former CFTC trial attorney Braden Perry highlights the differences between the lawsuits, stating that the Coinbase complaint involves no fraudulent activity. Instead, it is about the merging of three functions traditionally separated in securities markets. Interestingly, the SEC appears to have approved this business model during its IPO diligence.
In the Binance lawsuit, Zhao and the company are accused of controlling billions of dollars of customer funds transferred to a third party. The SEC also asserts that Binance secretly allowed large U.S. customers to trade on their main crypto exchange platform, an evasion of securities laws. In contrast, Coinbase’s lawsuit does not include claims about the exchange offering its services unlawfully to certain customers. However, one penalty the SEC seeks could ban Coinbase from operating as an exchange or broker in the U.S.
In conclusion, both lawsuits present significant implications for Binance and Coinbase, but Binance faces harsher accusations involving allegations of fraud and deception led by its CEO, potentially resulting in greater consequences. As the crypto industry continues to evolve, these legal battles may serve as a turning point in future regulation and oversight.
Source: Decrypt
