The US Securities and Exchange Commission (SEC) has accused Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao of engaging in deceptive practices that included inflating trading volumes and diverting customer assets.
The SEC filed a lawsuit on Monday, alleging that Binance and Zhao failed to impose restrictions on US customers, provided misleading information to investors regarding market surveillance controls, and operated an unregistered securities exchange.
The complaint, filed in a federal court in Washington, also claimed that Binance and Zhao clandestinely controlled customer assets, allowing them to mix and redirect customer funds. Additionally, the SEC stated that Binance established separate US entities as part of a complex scheme to evade federal securities laws in the United States.
The SEC further alleged that Sigma Chain, a trading firm owned and controlled by Zhao, engaged in wash trading from September 2019 to June 2022, artificially inflating the trading volume of cryptocurrency asset securities on the Binance.US Platform.
In response, Zhao took to Twitter, stating that Binance would provide a response after thoroughly reviewing the SEC’s complaint. He assured users that the exchange’s systems, including withdrawals and deposits, remain stable.
The news of the SEC lawsuit had an immediate impact on Binance’s native cryptocurrency, BNB, causing a drop of over 5% in its market value.
This legal action is the latest in a series of challenges faced by Binance. In March, the US Commodity Futures Trading Commission (CFTC) also filed a lawsuit against the exchange, accusing it of operating an “illegal” exchange and maintaining a compliance program that the regulator deemed a “sham.” Zhao responded to those charges by expressing disappointment and claiming that they provided an incomplete representation of the facts.
