Binance ꦓis facing accusations from the U.S. Securities and Exchange Commission (SEC) that it knowingly operated 🅘unregistered exchanges.

The SEC filed a lawsuit against Binance Holdings Ltd., BAM Trading Services Inc., and founder Changpeng Zhao on Monday for violating U.S. securities laws. The counts mentioned in the complaint include allegations of operating unregistered exchanges, misrepresenting trading controls and oversight on the Binance.US platform, and engaging in the unregistered offer and sale of securities.

Why Is SEC Suing Binance and Related Entities?

In its complaint, the SEC asserts Binance and BAM Trading, which operates the Binance.US platform with Binance, operated as unregistered exchanges, brokers, dealers, and clearing agencies, earning at least $11.6 billion in revenue, mostly from transaction fees.

𝔍 The regulator also said in its complaint Binance broke U.S. laws because of the unregist🌜ered offer for sale of its own BNB token and BUSD stablecoin, some crypto-lending products and offering staking-as-a-service.

The SEC also claims Zhao and Binance allowed high-value U.S. customers to secretly continue trading on Binance.com, despite publicly stating otherwise. In 2019, Binance stopped serving U.S. customers and set up Binance.US along with BAM Trading to meet U.S. regulatory standards.

Furthermore, the SEC alleges that Binance.US, touted as an independent platform for U.S. investors, was actually controlled by Zhao and Binance behind the scenes.

Additionally, the complaint accuses BAM Trading and BAM Management of misleading investors about trading controls on the Binance.US platform, which allegedly led to the commingling of customer funds with an outside entity controlled by Zhao and 澳洲幸运5官方开奖结果体彩网:wash trading on Binance.US by a trading firm owned by Zhao.

In their official response to the SEC complaint, Binance contends customer funds have always been safe and secure on their platforms.

"[T]he SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators—and investors do not appear to be the SEC’s priority. Because of our size and global name recognition, Binance is an easy target now caught in the middle of a U.S. regulatory tug-of-war," the company said in its response.

The charges highlight the SEC's ongoing efforts to properly regulate the crypto industry. Earlier this year, crypto exchange Bittrex was sued by the SEC for breaking securities laws. Coinbase is also expected to face action from the SEC at some point, as the crypto exchange 澳洲幸运5官方开奖结果体彩网:received a Wells notice from the regulator earlier this year.

Allegations of Comminglinℱg Customer Funds and Wash Trading

Two of the most notable allegations included in the𝔍 SEC complaint are the commingling of customer funds with an outside entity controlled by Zhao, known as Merit🌊 Peak Limited, and wash trading on the Binance.US platform.

Sigma Chain, which is a trading firm owned by Zhao, is alleged to have engag🍸ed in wash trading on Binance.US from September 2019 to June 2022 in an effort to artificially inflate volume on the platform🉐.

According to the complaint, much of the alleged wash trading coincided with important timeframes in Binance's history such as during the initial launch of Binance.US, after the initial listing of various crypto asset securities, and during the time leading up to BAM Trading's seed funding round.

The complaint included a chart indicating more than 35% of Binance.US's total COTI trading volume was wash trading conducted by Sigma Chain on multiple days in April 2022.

Multiple Crypto Assets Identified as Securi𒊎ties in SEC Complaint

Notably, the SEC complaint against Binance lists twelve different crypto assets as securities that were made available for trade on Binance's platforms. The crypto assets specifically called out by name are: Solana (SOL), Cardano (ADA), Polygon (MATIC), Fi🐼lecoin (FIL), Cosmos (ATOM), The Sandbox (SA💝ND), Decentraland (MANA), Algorand (ALGO), Axie Infinity Shards (AXS), and Coti (COTI). However, the complaint adds that this is not an exhaustive list of all securities available for trade on Binance's platforms.

Additionally, the complaint points outꦡ that Binance made available for trade on its platforms various crypto assets that have already faced eꦗnforcement actions, including but not limited to Amp (AMP), Augur (REP), TerraUSD (UST), and Tron (TRX).

According to the complaint, the offers and sales of BNB, BUSD, Binance’s “BNB Vault” program, and Binance’s “Simple Earn” program were examples of unregistered and illegal securities offerings, in addition to BAM Trading's staking-as-a-service program.