- U.S. regulators have ramped up crypto enforcement actions in 2023.
- Binance has found itself at the receiving end of two lawsuits from top regulators.
- There are some critical differences between the SEC case and the CFTC lawsuit.
In the wake of the FTX collapse, market regulators in the United States have ramped up crypto enforcement actions. This increased enforcement effort has not boded well for Binance, the world’s largest crypto exchange that has often been under scrutiny from regulators.
In just over two months, the crypto exchange and its founder Changpeng “CZ” Zhao, have received two separate lawsuits from the U.S.’s top market regulators.
In March, the Commodities Futures Trading Commission (CFTC) slapped Binance with a lawsuit alleging that the exchange had violated U.S. derivatives laws. In the latest instance, the Securities and Exchange Commission (SEC) has also filed charges against the Binance.
How Do the Two Cases Compare?
In a Monday, June 5 complaint, the SEC filed 13 charges against Binance, Binance’s U.S. affiliate BAM Trading, and Zhao over several alleged violations of U.S. securities laws.
Like the CFTC lawsuit, the SEC argues that Binance and Zhao subverted its controls to allow wealthy U.S. customers access to its international platform. At the same time, the SEC also alleged that the exchange and Zhao maintained significant control over Binance.US, despite the company’s claim otherwise.
Unlike the CFTC lawsuit, however, the SEC has alleged that the exchange engaged in the sale and offer of unregistered securities, namely BNB and Binance USD (BUSD). The SEC also named SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI among Binance listed tokens it considered unregistered securities.
In a more damning claim, the SEC alleges that Binance commingled “billions of dollars” in customer deposits while sending them to Merit Peak Limited, a third party allegedly owned by Zhao.
“We intend to defend our platform vigorously,” Binance asserted in a statement responding to the SEC lawsuit. Without admitting wrongdoing, the crypto exchange contended that it had tried to settle alleged concerns with the SEC, adding that the SEC’s claims were undeserving of an enforcement action.
On the Flipside
- Binance is reportedly under investigation by the U.S. Department of Justice.
- The SEC has now launched enforcement actions against Kraken, Gemini, Bittrex, and Binance in the first half of 2023 alone.
- The SEC has also threatened to sue Coinbase over several aspects of its business.
Why This Matters
Binance is the largest crypto exchange by volume. The SEC case against the crypto exchange will likely have a broader market impact.
Read this to learn more about the CFTC case against Binance:
Regulatory troubles may force Binance’s CZ to step down as CEO. Learn more about the man insiders have tipped as his rightful successor: