- The SEC alleges that Binance has been operating illegally in the US.
- Internal chat logs reveal discussions about circumventing US regulations.
- The lawsuit also implicates Binance founder Changpeng Zhao.
Binance is facing a Securities and Exchange Commission (SEC) lawsuit, which accuses the crypto giant of operating illegally in the US. The case uncovers a series of internal communications that suggest a deliberate strategy to circumvent US regulations.
The SEC’s lawsuit, filed on June 5, 2023, accuses Binance of engaging in “violative conduct” for years. The lawsuit also presents a trove of evidence to back up its claims, including damning chatlogs that implicate Binance CEO Changpeng “CZ” Zhao.
‘We Are Operating as a F*ing Unlicensed Securities Exchange in the USA Bro’
In one of the internal chats revealed in the lawsuit, Binance’s former Compliance Lead Samuel Lim is quoted as saying, “We are operating as a f*ing unlicensed securities exchange in the USA bro.”
Lin, the then head of compliance, goes on to say, “There is no fking way we are clean” “I have seen NOTHING to prove we are”
The SEC claims that these statements and other logs suggest a clear awareness of the company’s violation of US laws.
TChat Logs Implicate Binance CEO Changpeng Zhao
The lawsuit also implicates Binance’s founder, Changpeng Zhao, in the alleged misconduct. According to the SEC, Zhao directly controlled Binance US, including hiring the first CEO of BAM Trading.
In one of the logs, Sam Lin tells someone to onboard a user through the US exchange but trade via Binance.com with a special setup. He added that “CZ will definitely agree to this lol,” implicating Binance’s CEO’s direct involvement in the violations.
Lin also allegedly mentions that “we always have a way for whales” and “that’s the nature of our biz.
Earlier Leaks and Revelations
In March 2023, a series of revelations came to light that further implicated Binance in questionable business practices. The CFTC lawsuit against Binance revealed a series of chat logs, including Samuel Lin.
For instance, in February 2019, Lim told Changpeng Zhao, the founder of Binance, that “a huge number” of Binance’s customers who trade less than two Bitcoin “could be U.S. citizens in reality. They have to get smarter and VPN through non-U.S. IP.”
In another instance, Lim was quoted as saying, “CZ wants people to have a way to know how to VPN to use [a Binance functionality] . . . it’s a biz decision.” He also mentioned, “We are actually pretty explicit about [encouraged VPN use] already – even got a fking guide.”
On the Flipside
- While the lawsuit presents a damning picture of Binance’s operations, the allegations are yet to be proven in court.
- The SEC’s lawsuit against Binance is already affecting other companies offering crypto exchange services. For instance, Robinhood may delist crypto assets that the agency mentioned in its lawsuit.
Why This Matters
The SEC’s lawsuit against Binance is a significant development for crypto traders. If the allegations are proven, they will likely lead to severe penalties for Binance, potentially barring it from the US market.
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