Yesterday at 6:00 PM, crypto investors saw a sudden drop in Bitcoin prices. The expected had happened. For a long time, it was anticipated that the SEC would file lawsuits against the Binance and Coinbase exchanges. The move, which was only a matter of time, was now made for Binance. Moreover, with serious accusations. CFTC also recently initiated a similar lawsuit.
Summary of the Binance Case
This lawsuit was filed after a quite long preparation period. While everyone thought the SEC was lenient on crypto rules, the agency was preparing for these charges. Four individuals and entities are accused in the lawsuit.
- Changpeng Zhao
- Binance Holdings Ltd.
- Bam Trading Services Inc.
- Bam Management US Holdings INC.
The accusations generally include;
- Operating an unregistered trading platform.
- Selling and promoting unregistered securities.
- Defrauding investors.
- Manipulative trading.
- False statements.
- Combining CEX, broker-dealer, and clearing house roles.
The SEC alleges that CZ owns 100% of several companies including Binance Holdings Limited, CPZ Holding, and Coinmarketcap.
The company plans disclosed in the SEC complaint consist of companies located in;
- Cayman Islands
- British Virgin Islands
- Delaware
- Switzerland
- Trust companies based in New York and Nevada
According to allegations, Bam Management US Holdings Inc and Bam Trading Services Inc were created by Binance to independently control the operation of the Binance US platform. However, according to the SEC, this was just a part of a multi-step plan designed and implemented by CZ to secretly evade US laws.
In the document, it is claimed that these two companies have made false statements to investors about the US version of the Binance platform. According to the SEC, Binance never implemented the controls claimed by the two companies for Binance US, attracting a fund of 200 million investors and billions of trading volume. In the document, it is alleged that Binance exchange did not implement the trade oversight or manipulative trade controls that BAM Trading and BAM Management advertised to investors on the Binance US platform. Furthermore, the SEC alleges that CZ and Binance lied about prohibiting US citizens from using the global version of the Binance platform. This issue was also included in the CFTC complaint.
The SEC alleges that Binance exchange actually helped large-capital US customers to bypass controls to use the global version of the Binance platform. According to the SEC, Binance has escaped US regulations and risked billions of investor capital by making false statements about its compliance. Moreover, the SEC alleges that CZ owns a secret Binance account for a company called “Merit Peak Ltd” to freely manipulate funds on Binance.
What Does the SEC Want?
- Stop Binance exchange from violating the laws.
- The return of unlawful gains along with interest.
If Binance loses this fight with the SEC, it could go bankrupt due to the significant amount of money at stake, including accrued interests.
