LAGOS, Nigeria (VOICE OF NAIJA) – The SEC has filed a lawsuit against Binance, the biggest cryptocurrency exchange in the world, and its founder Changpeng Zhao, alleging that they broke many U.S. securities laws and misappropriated investor funds while operating as an unregistered exchange and as an unlicensed exchange.
The Securities and Exchange Commission case, which was filed in the District of Columbia’s U.S. District Court on Monday, names thirteen claims against the company, among them the mixing of customer funds and their diversion to Sigma Chain, an organization owned by Zhao.
Zhao formed the Cayman Islands-based limited liability business Binance, and the allegations against it are similar to those made against FTX, the second-largest cryptocurrency exchange, which failed last year.
According to the lawsuit, the firm’s owners were aware of the alleged legal infractions to a certain extent since: “we are operating as a fking unlicensed securities exchange in the USA bro,” Binance’s CCO blatantly stated to another Binance compliance officer in December 2018.”
SEC Chair Gary Gensler in a written statement that Zhao and Binance “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
“The public should beware of investing any of their hard-earned assets with or on these unlawful platforms,” Gensler said.
In a social media post, Binance said that it has been cooperating with the SEC’s investigation but said that the agency “chose to act unilaterally and litigate.”
“While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. We intend to defend our platform vigorously,” the company said in a Twitter post.
“Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry.”
The lawsuit was filed about eight months after FTX went out of business. FTX was also accused of mixing up customer assets and using the money to make high-risk transactions while customers were unaware of it.
Sam Bankman-Fried, the creator of FTX, was accused in December by US prosecutors and the SEC with a number of money laundering, fraud, and securities fraud offenses. The fall is most likely the time of his criminal trial.
“The new SEC complaint against Binance is a laundry list of allegations setting out precisely the same complaints that many in the Bitcoin and cryptocurrency communities have leveled against Changpeng Zhao and his firms for many years.
“No one who works in the space will be surprised by any of the claims,” said Cory Klippsten, CEO of Swan Bitcoin, a bitcoin financial services company. “These practices of Binance have practically been open secrets.”
Meanwhile, US authorities have previously pursued Binance.
The Commodity Futures Trading Commission accused Binance and Zhao of several CTFC violations in an enforcement case filed in March in the U.S. District Court for the Northern District of Illinois.
Samuel Lim, who served as Binance’s previous top compliance officer, is also accused in the complaint of encouraging the company to commit infractions.