Gary Gensler, SEC Chair, stated, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” Binance denies the allegations, asserting that user assets are safe and secure on its platforms.
Changpeng Zhao, the majority owner of Binance and Binance.US, is a prominent figure in the crypto industry. Although Binance.US was portrayed as an independent entity, it was deeply intertwined with the global exchange, sharing staff, finances, and an affiliated entity for cryptocurrency transactions.
The SEC’s lawsuit also puts a spotlight on Binance’s lack of controls to prevent manipulative trading practices, such as wash trading. Wash trading involves users executing both buy and sell orders to create artificial volume and manipulate prices. And it was still in play on Binance.US as recently as January 2021.
The SEC’s decision to sue Binance is a significant step in asserting its jurisdiction over the crypto industry. This move follows the SEC’s lawsuits against other crypto exchanges, including Bittrex, and its intent to take enforcement action against Coinbase, the largest U.S. crypto exchange.
