The Securities and Exchange Commission (SEC) has filed charges against Binance Holdings Ltd., the world’s largest crypto asset trading platform, and its U.S.-based affiliate, BAM Trading Services Inc., along with founder Changpeng Zhao. The charges include operating unregistered exchanges and broker-dealers, misrepresenting trading controls, engaging in unregistered securities sales, and more.
Also as an official tweet from the SEC, despite claims that U.S. customers were restricted from using Binance.com, Zhao and Binance allowed high-value U.S. customers to continue trading covertly. Binance.US, portrayed as an independent platform, was also found to have hidden control by Zhao and Binance.
The SEC alleges that Zhao and Binance had control over customer assets, allowing them to commingle and divert funds, including to a company owned by Zhao called Sigma Chain. The complaint also accuses BAM Trading of misleading investors about trading controls on Binance.US, while Sigma Chain engaged in manipulative trading practices to inflate trading volume. Billions of dollars of investor assets were concealed and transferred to Merit Peak Limited, a third-party entity owned by Zhao.
In addition to securities law violations, Binance and BAM Trading are charged with operating unregistered national securities exchanges, broker-dealers, and clearing agencies. They are also accused of offering and selling Binance’s own crypto assets, such as BNB and BUSD, without proper registration. Zhao is held responsible as a control person for these violations.
SEC Chair Gary Gensler criticized Zhao and Binance for their web of deception, conflicts of interest, and lack of disclosure. He warned the public to be cautious and avoid investing on these unlawful platforms.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, highlighted how Zhao and Binance knowingly evaded securities laws for their own financial gain. Grewal pointed out the heightened risks and conflicts of interest faced by investors on Binance platforms, including a lack of transparency and false claims about preventing manipulative trading.
The SEC’s complaint, filed in the U.S. District Court for the District of Columbia, states that Binance.com and Binance.US, both under Zhao’s control, operated as unregistered exchanges, brokers, dealers, and clearing agencies, generating over $11.6 billion in revenue from transaction fees, including those from U.S. customers.
Binance.com should have registered as an exchange, broker-dealer, and clearing agency, while Binance.US and BAM Trading should have registered as an exchange and clearing agency. BAM Trading should have also registered as a broker-dealer. Zhao is held accountable as a control person for the registration violations.
The SEC’s investigations into the Binance.US and Binance.com platforms were led by experienced professionals, with the oversight of their respective divisions. The litigation process is currently underway.
Also Read: Binance and Its CEO sued by CFTC for US Regulatory Violations
