The allegations are tough: customer funds are said to have been secretly diverted. The tracks lead to Zug.
Fraud and deception of investors – these are two of the heaviest allegations by the US Securities and Exchange Commission against Binance, the world‘s largest crypto exchange. The traces lead directly to Switzerland: To Zug, where the Sigma Chain company is based on Gubelstrasse. According to US authorities, the Zug-based company is controlled by Changpeng Zhao, the founder of Binance.
Front companies in Switzerland and Caribbean Virgin Islands
Binance is said to have redirected customer funds back to the crypto platform via the Zug-based company in order to artificially inflate the trading volume on Binance. So to give the impression that the trading platform is used a lot, even if that is not the case. Binance itself denies the allegations.
Overall, the indictment of the US Securities and Exchange Commission is over 130 pages long – and includes numerous allegations. Binance is said to have conducted financial transactions illegally, without the necessary authorization and deceived investors. And Binance founder Zhao is also said to have used a trading company in the Caribbean Virgin Islands to divert customer funds to his own account.
Parallels to the collapse of the crypto exchange FTX
This is very reminiscent of the collapse of the crypto exchange FTX. At FTX, too, funds have been diverted from customers without their knowledge in order to speculate. Since the collapse of the crypto exchange FTX, the US authorities have tightened the measures against crypto heavyweights.
This also applies to the crypto platform Coinbase, which is also being charged today for allegedly violating the securities law in the USA. The latest wave of lawsuits is having an impact on the crypto industry worldwide. The most important cryptocurrencies Bitcoin and Ethereum lost up to 5 percent of their market value today.
What does that mean for Switzerland as a crypto location?
Switzerland is also affected: the fact that a company based in Zug is being targeted by the latest US allegations is damaging Switzerland’s image. But only at first glance. The entire Swiss crypto location could also benefit from the latest wave of lawsuits.
Because while there is no regulation in the USA that offers legal certainty, Switzerland is ahead when it comes to crypto regulation. Industry experts are observing high outflows of customer funds, away from unregulated crypto exchanges such as Binance, towards regulated financial service providers such as Sygnum Bank in Switzerland. Since the collapse of crypto exchange FTX, this trend has intensified. And this trend is likely to accelerate again now, with the latest waves of lawsuits.