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Breaking: SEC Sues Binance for US Securities Violations
The Securities and Exchange Commission is suing crypto giant Binance over a variety of alleged violations including offering unlicensed securities, commingling investor funds and allowing US customers on the unregulated international exchange.
The SEC filed the complaint, which includes 13 different charges, on Monday and the crypto market experienced a significant drop with coins like Bitcoin and Ether declining by 5-10% at the time of publication.
Binance immediately responded to the complaint claiming it had been negotiating a settlement with the SEC over the charges but the SEC opted to abandon those talks. Binance also reiterated that all customer funds were safe.
It’s not the first major complaint against Binance from US regulators as earlier this year the CFTC unveiled a similar complaint.
SEC: Binance Showed “Blatant Disregard for Federal Law”
The 13 different charges against Binance include a variety of different alleged violations. Here are some of the most notable alleged violations:
- Operating as unregistered exchange, broker, and clearing agency
- Unregistered offer and safe of crypto assets
- Failure to restrict US investors from accessing Binance.com
- Misleading investors
Binance currently offers a limited Binance.US product that offers less features than the flagship Binance.com product. The SEC claims that Binance encouraged US customers to use tools like VPNs to access the more feature-rich international site.
The filing also claims the company misled investors about their risk controls and concealed who was operating the platform. The SEC also took issue with Binance offering its own exchange token, BNB, its BUSD stablecoin, crypto lending products and staking-as-a-service.
One of the most headline-generating pieces of evidence from the complaint was a sensational quote from a Binance senior executive where he allegedly told a compliance officer they were operating as “a [F****ing] unlicensed security exchange.”
SEC Claims SOL, ADA, MATIC Are Unlicensed Securities
One of the charges in the claim may have some effect on the overall crypto industry in the future. Specifically the SEC named 10 of the tokens it claimed Binance was offering as unlicensed securities.
The 10 tokens included the following:
- Solana (SOL)
- Cardano (ADA)
- Polygon (MATIC)
- Coti (COTI)
- Algorand blockchains (ALGO)
- Filecoin network (FIL)
- Cosmos hub (ATOM)
- Sandbox platform (AXS)
- Axie infinity game and Decentraland (MANA)
If these projects were classified as a securities it would change market dynamics and make it much harder for exchanges to offer them.
Interestingly Bitcoin and Ethereum were not mentioned in the complaint. Bitcoin has escaped the attention of the SEC and seems destined to be branded a commodity rather than a security. Meanwhile the SEC has waffled on Ethereum but the dominant smart contract platform wasn’t mentioned as a security in the complaint.
Binance Intends to “Defend Platform Vigorously”
Binance published a lengthy response to the SEC charges and founder CZ took the time to tell users on Twitter that all systems were stable including withdrawals and deposits.
The response from Binance started by saying the company was “disheartened” by the SEC’s decision to file a complaint.
Binance alleged that the SEC is attempting regulation by enforcement and it will hurt the structure of the cryptocurrency industry in the USA.
Here’s are several key passages from the Binance response:
Today’s action is another in a line of examples where, as with other crypto projects facing similar suits, the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology. Unilaterally labeling certain tokens and services as securities – even ones over which other U.S. authorities have asserted jurisdiction – only compounds these problems.
Perhaps most surprising, the SEC’s actions undermine America’s role as a global hub for financial innovation and leadership. Digital asset laws remain largely undeveloped in much of the world, and regulation by enforcement is not the best path forward. An effective regulatory framework demands collaborative, transparent, and thoughtful policy engagement—a path the SEC has abandoned…
…We will continue to cooperate with regulators and policymakers in the U.S. and across the globe because that is the right thing to do. And Binance remains committed to productive engagement to ensure the next generation of cryptocurrency regulation fosters innovation while implementing and ensuring important consumer protections. Because Binance is not a U.S. exchange, the SEC’s actions are limited in reach. Still, we stand with digital asset market participants in the U.S. in opposition to the SEC’s latest overreach, and we are prepared to fight it to the full extent of the law.
We’ll have more on this story as it breaks.
