Crypto investors are still recovering from the shock of the FTX crash in November 2022. Most investors’ balances took a serious hit with the last major crash. Now the US Department of Justice is indecisive about starting a process that could lead to a similar outcome. Has the US DOJ finally shown mercy? What are the allegations against Binance?
Officials from the US Department of Justice are evaluating fraud charges against the cryptocurrency exchange Binance, but they are concerned about the cost to consumers, according to people familiar with the matter. They are right to be concerned because currently at least half of the market volume comes from this exchange. Moreover, the volume, which has dropped to 17 billion dollars, has made the cryptocurrency more fragile due to market makers withdrawing from the market.
When we announced the news as breaking news, Bitcoin had experienced a rapid drop below $29,000. However, it is now back above $29,200 due to more details emerging. Is the recent rise an indication that the US Department of Justice has shown mercy? It is usually difficult to be sure because after such bad news, if the order books are not sufficiently filled, there are fake rises for selling liquidity.
According to insiders, Binance and its founder Changpeng Zhao are already being sued by the Commodity Futures Trading Commission and the SEC. The SEC accuses Zhao and his company of operating an unregistered exchange in the US and knowingly allowing their citizens to participate in Binance’s offshore exchange.
The SEC also alleged that Binance misled customers and investors by using a secret market maker firm called Sigma Chain to manipulate trades on the US platform. Legal experts said that the SEC’s lawsuit resembled a criminal indictment due to the seriousness of the charges and increased the possibility of criminal charges being pursued. We have been talking about this danger for weeks, and even months if we include the CFTC case. Because what is written in the indictment shows that the US Department of Justice will eventually be involved.
For example, we cannot say the same thing about the case against Coinbase. Binance has been sued for a much wider range of crimes.
When the Department of Justice evaluates whether to prepare an indictment against major organizations, it usually takes into account the impact on innocent consumers, employees, and shareholders. This has been the case since Arthur Andersen twenty years ago. The real question is whether these factors will play a role when it comes to a crypto exchange operating in a legal gray area.
According to insiders, the Prosecutors, who do not want to trigger a possible collapse in the crypto market, are also considering a settlement that would mitigate consumer harm.