SEC says crypto firm Binance mishandled funds, violated securities laws

Lawsuit says Binance and founder Zhao were engaged in 'an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law

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Binance CEO Changpeng Zhao. — AP file

By AP

Published: Mon 5 Jun 2023, 9:29 PM

The world's largest cryptocurrency exchange Binance and its founder Changpeng Zhao are accused of misusing investor funds, operating as an unregistered exchange and violating a slew of US securities laws in a lawsuit filed by the SEC.

Filed in the US District Court for the District of Columbia, the Securities and Exchange Commission lawsuit on Monday lists thirteen charges against the firm — including commingling and divert customer assets to an entity Zhao owned called Sigma Chain.

Binance is a Cayman Islands limited liability company founded by Zhao.

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The lawsuit lays out the extent to which the firms owners knew of the alleged legal violations: "Binance’s CCO bluntly admitted to another Binance compliance officer in December 2018, “we are operating as a unlicensed securities exchange in the USA bro.”

SEC Chair Gary Gensler said in a written statement that Zhao and Binance “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law".

“The public should beware of investing any of their hard-earned assets with or on these unlawful platforms,” Gensler said.

This follows other actions US agencies have taken against the firm and its leadership.

In March, the Commodity Futures Trading Commission filed an enforcement action against Binance and Zhao in the US District Court for the Northern District of Illinois charging them with numerous CTFC violations.

The complaint also charges Samuel Lim, Binance’s former chief compliance officer, with aiding and abetting Binance’s violations.

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AP

Published: Mon 5 Jun 2023, 9:29 PM

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