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The U.S. Securities and Exchange Commission today sued Binance, hitting the world’s biggest cryptocurrency exchange and its CEO with 13 charges.
As first reported by Bloomberg, the digital asset behemoth and its CEO Changpeng ‘CZ’ Zhao, who is Binance’s founder and controlling shareholder, have been accused of breaking U.S. securities rules, a court filing shows.
The SEC charges include the unregistered offer and sale of crypto assets, failure to restrict U.S. investors from accessing Binance.com, and operating as an unregistered exchange, broker, and clearing agency.
A Monday SEC court document filed in federal court in the District of Columbia alleges that Binance and its boss had a “blatant disregard” of federal securities laws and “enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”
“We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk—all in an effort to maximize their own profits,” wrote Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in a press release on Monday.
SEC Chair Gary Gensler added that Binance “attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes” in a bid to keep big American investors using the platform.
Zhao said on Twitter that he had not yet seen the lawsuit and wrote the number 4, which he often posts to allude to a tweet he made back in January that connects the number to “Ignore FUD, fake news, attacks, etc.”
“Haven't seen it yet,” he wrote on Monday. “Media gets the info before we do.”
Our team is all standing by, ensuring systems are stable, including withdrawals, and deposits.
We will issue a response once we see the compliant. Haven't seen it yet. Media gets the info before we do.
— CZ 🔶 Binance (@cz_binance) June 5, 2023
Binance’s press team did not immediately respond to Decrypt’s request for comment.
Binance’s native BNB token dropped sharply on the news: the asset is currently trading for $284.68, according to CoinGecko, a 7.2% 24-hour dip.
The SEC alleges that Binance and Zhao misused and commingled customers’ funds. The defendants even allegedly diverted them to a trading entity that Zhao controlled called Sigma Chain.
It added that Zhao and his company engaged in an “extensive web of deception.”
Binance has become a controversial company lately as American regulators have been chasing it and launching a number of investigations into the crypto company.
The CFTC, SEC, and IRS have all opened investigations into the exchange and Department of Justice prosecutors in December were reportedly weighing up whether to aggressively go after the exchange or take time to review more evidence.
Just in April, lawyers hit Binance boss Changpeng Zhao and his exchange with a $1 billion civil lawsuit for allegedly touting unregistered securities and paying celebrities to help do so.