U.S. SEC Files 13 Charges Against Binance Entities & Founder Changpeng Zhao

U.S. SEC Files 13 Charges Against Binance Entities & Founder Changpeng Zhao

The U.S. Securities and Exchange Commission (SEC) has filed 13 charges against Binance, the world’s largest crypto exchange, and its founder, Changpeng Zhao, alleging both comingled billions of dollars’ worth of user funds and sent them to a European company controlled by Zhao.

The charges include operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities.

The SEC’s complaint, filed in Federal Court in Washington, D.C., alleged that Binance and Zhao secretly controlled customers’ assets, allowing them to intermingling and divert customer funds, and that Binance created separate U.S. entities as part of an elaborate scheme to evade U.S. federal securities laws.

According to the U.S. Regulator Zhao and his exchange worked to subvert ‘their own controls’ to allow high-net-worth U.S. investors and customers to continue trading on Binance’s unregulated international exchange.

The SEC’s complaint further alleged that BAM Trading and BAM Management US Holdings, Inc. (BAM Management) misled investors about non-existent trading controls over the Binance.US platform, while Sigma Chain engaged in manipulative trading that artificially inflated the platform’s trading volume.

As a result of the move, Binance has become embroiled in a string of legal woes that started with the US Commodity Futures Trading Commission's (CFTC) suit in March for operating what the regulator called an ‘illegal’ exchange and a bogus compliance program, through which traders were exposed to illegal trading practices.

Further Binance is also under investigation by the Justice Department for suspected money laundering and sanctions violations.

The world's biggest crypto exchange, Binance was founded in Shanghai in 2017 by CEO Changpeng Zhao.

While its holding company is based in the Cayman Islands, Binance denied having any headquarters and has declined to state the location of its main Binance.com exchange.

Last year Binance's global trading platform, Binance.com dominated the crypto trading landscape, processing trades worth about $65 billion a day with up to 70 per cent of the market. The firm has processed at least $10 billion in payments for criminals and companies seeking to evade US sanctions.

Additionally, on May 23 it was reported that Binance had commingled its customers’ funds with its corporate revenues in Silvergate Bank account belonging to trading firm Merit Peak, in breach of US financial rules that require client money to be kept separate.

However, Binance denied mixing customer deposits and company funds, saying that users who sent money to the account were not making deposits but rather buying Binance’s bespoke dollar-linked crypto token.