Earlier this year, crypto exchange Binance announced an impressive figure: over the last two years, its revenue had grown tenfold. A month earlier, CNN reported that the exchange had acquired a Japanese company with the intention of expanding its operation. You might think, from looking at these announcements, that everything was coming up in Binance’s favor; the $12 billion in revenue the exchange took in last year certainly suggested that.
The Securities and Exchange Commission begs to differ, however. On June 5, the SEC announced that it was charging Binance and its founder Changpeng Zhao with no less than 13 violations of securities laws.
“As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied,” said SEC Chairman Gary Gensler in a statement.
“They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value U.S. customers on their platforms,” he added. “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
The exchange is accused of not having registered properly for the types of financial activity in which it was engaged, as well as having mislead investors. In a response to the SEC charges, the company addressed the need for reform but expressed its frustration with the process thus far.
“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,” the statement read in part. “We intend to defend our platform vigorously.”
Late last year, Zhao and Binance were in the news owing to a series of Tweets from FTX’s Sam Bankman-Fried, in which Bankman-Fried critiqued a professional rival thought to be Zhao, as per CNBC’s reporting. In November of 2022, Binance opted not to acquire FTX.
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As the New York Times noted in its reporting on the charges, this case could have a significant impact on the world of cryptocurrency. The Times pointed out that this is not the first time this year that Binance has faced scrutiny from regulatory agencies — something which, given the size of Binance, speaks to the crypto industry as a whole.
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