More trouble for Binance, one of the largest cryptocurrency exchanges in the world. Yesterday the Security and Exchange Commission (SEC) accused the company and its CEO and founder Changpeng Zhao violate federal laws relating to financial products. But what happened and what implications does this accusation have on the crypto market?
The allegations of the Sec
According to reports from the SEC, Binance would intentionally ignored federal regulations and the protections that these rules guarantee to investors and to the entire market. Basically, the SEC is now accusing Binance of improperly handle the funds of its clientslying to investors and the regulator about its actual operations.
For this, the SEC inflicted on Binance 13 counts of indictmentincluding as we said the accusation of not correctly recording and declaring all the exchanges.
“Across thirteen indictments, we allege that Zhao and Binance entities engaged in one vast web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law“said the president of the SEC Gary Gensler.
“We not only argue that Zhao and the Binance entities knew the rules, but that they knowingly chose to circumvent them, putting their customers and investors at risk, all in an effort to maximize their profits.”
Among the various charges, the SEC accuses the broker of having encouraged American investors to trade crypto asset securities through several unregistered online brokers and available at Binance.com and Binance.Us.
On the other hand, Zhao and Binance stated to the contrary that US customers were prohibited from trading on Binance.com, but according to the SEC reports, Binance still secretly allowed key US customers to continue trading on Binance. com, and this according to the first reconstructions would have happened using VPNs.
Furthermore, according to the SEC, Binance has allegedly mixed billions of dollars of customer funds at will and then secretly sent them to a separate company called Sigma Chain, a company controlled by the company’s founder and CEO, Changpeng Zhao.
“They have attempted to circumvent US securities laws by announcing fictitious controls that they have ignored behind the scenes so they can keep high-value US clients on their platforms,” the SEC declares, which continues “people should be careful not to invest their hard-earned goods with or on these illegal platforms.”
For its part, Binance has responded harshly to the allegations, declaring that “the lawsuit is unsubstantiated and that any allegation that users’ assets on Binance.Us have been put at risk is simply wrong“. Also, according to Binance, “the broker cannot be considered a US stock exchange – the power of the SEC is limited”.
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This is certainly not the first lawsuit facing Binance. As recently as March, the Commodity Futures and Trading Commission (CFTC) sued the exchange and Zhao over an alleged violation of CFTC rules.
Cryptocurrency market on a roller coaster
It goes without saying that following the SEC lawsuit against Binance and its founder, the cryptocurrency market has experienced a significant decline, with the overall market capitalization of cryptocurrencies which has decreased by about 4.5% since yesterday, according to CoinMarketCap. At the same time, the CoinDesk Market Indexthe benchmark index for 156 digital assets, fell 6.2% in the past 24 hours, also signaling a significant decline across the market.
Bitcoin lost 5% in yesterday’s session alone, going from $27,114 to $25,700. The same fate also happened for all the other main cryptocurrencies with ether losing 4.5% and the Binance token, BNB, which suffered a drop of 8% in the first hour only after the indictment by the Sec.
Deep drops also for other exchanges with the shares of Coinbase, the largest US broker, which yesterday even lost 12% compared to Friday’s close, to then recover ground.
Heavy outflows from Binance
After the indictment by the SEC, many investors have withdrawn their money from the exchange for fears that the indictment could trigger withdrawal problems on the platform. In this sense, according to the Nansen company, investors have withdrawn approximately 790 million dollars from Binance in the last 24 hours.