The Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and its CEO, Changpeng Zhao, alleging multiple violations of securities laws and accusing the world’s largest cryptocurrency exchange of participating in an “extensive web of deception.”
The SEC claims that Zhao and Binance falsely asserted that US customers were restricted from using the international exchange, while actually circumventing their own controls to allow such transactions. Additionally, the SEC alleges that despite claiming that the US exchange was an independent trading platform for American investors, Zhao and Binance secretly maintained control over Binance.US operations.
According to the allegations, Zhao and Binance managed to commingle or misallocate customer assets at will, including diverting funds to an entity known as Sigma Chain, which Zhao owned and controlled. SEC chair Gary Gensler stated, “Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Gensler further remarked, “As alleged, Zhao and Binance misled investors about their risk controls and manipulated trading volumes while actively concealing the operators of the platform, the manipulative trading by its affiliated market maker, and even the custody of investor funds and cryptocurrency assets. They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes to retain high-value US customers on their platforms.”
In a blog post, Binance expressed disappointment with the SEC’s complaint and announced its intention to “vigorously defend our platform.” The company criticized the SEC for its lack of constructive engagement, describing it as a misguided refusal to provide essential clarity and guidance to the digital asset industry.