SEC accuses Binance of mishandling funds and lying to regulators
The Securities and Exchange Commission has accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds and lying to regulators and investors about its activities in a sweeping case filed in federal court on Monday.
The Wall Street regulator said Binance had mixed “billions of dollars” in customer funds and secretly sent them to a separate company called Merit Peak Limited, which is controlled by Binance founder Changpeng Zhao.
The charges include misleading investors about the adequacy of its systems to detect and monitor manipulative trading. Regulators also said that Binance has not taken sufficient action to deny US investors access to Binance’s unregulated exchange.
The charges against the largest crypto exchange were the latest moves by US regulators and prosecutors to rein in the Wild West of crypto trading and force major players in the space to abide by US laws.
Binance was already under increasing pressure. The Department of Justice is investigating the exchange for money laundering violations. Binance lost its third-party accounting firm when Mazars announced it would no longer do business with crypto companies late last year. The company has also seen its control over the crypto market shrink.
To improve its reputation, Binance has hired a slew of new compliance officers, including a former federal prosecutor who now heads the compliance operation.
“We allege that Zhao and the Binance entities not only knew the traffic rules, but also deliberately chose to circumvent them and endanger their clients and investors,” said Gurbir S. Grewal, director of the SEC’s enforcement department.
The country’s largest securities regulator has filed 13 charges against Binance and Mr. Zhao, better known in the crypto world as “CZ”. Mr Zhao.
Binance representatives had no direct comment.
The CFTC is seeking to ban Mr. Zhao for life from conducting business under his jurisdiction. The agency also wants to permanently ban Binance from the United States.
The moves against Binance and Mr. Zhao come months after the filing of criminal charges against Sam Bankman-Fried, the founder of FTX, who was a major rival to Binance in crypto trading until FTX imploded and filed for bankruptcy last November.
This is a breaking news story. Check back later for updates.