SEC Still Investigating Binance for Potential FTX-Like Fraud

Did Binance have access to user funds? SEC’s ongoing investigation into Binance.US scrutinizes potential FTX-style fraud.

Gary Gensler in his office investigating all ties with FTX and Binance is next on his man case.
Created by Kornelija Poderskytė from DailyCoin
  • SEC probes Binance.US for potential control over customer assets like FTX.
  • Binance.US faces asset and user decline amid ongoing legal challenges.  
  • Binance.US and Zhao plead guilty to anti-money laundering charges. 

After Binance’s $4 billion settlement with US authorities, many have sighed with relief. The fine was not as bad as expected. However, recent revelations show that Binance is not in the clear yet.

Recent reports suggest that the US Securities and Exchange Commission (SEC) is still rigorously investigating Binance.US. Specifically, the agency is exploring the possibility of FTX-style fraud within the platform, involving misappropriation of user assets. If proven true, the allegations could have far-reaching implications for the exchange. 

SEC Probes Binance

The SEC is intensifying its investigation into Binance.US, reports suggested on Monday, November 27, spurred by concerns of potential fraud similar to the FTX case. Specifically, the agency is looking into whether the platform and its founder, Changpeng “CZ” Zhao, may have had unauthorized access to control assets stored on Binance.US. 

Binance and Zhao pleaded guilty to criminal charges, primarily related to anti-money laundering controls and compliance with U.S. sanctions laws. This plea resolved most of the long-standing investigations by U.S. authorities. However, it’s notable that the Justice Department’s settlement did not encompass any allegations of Binance misusing customer crypto assets.

In the heart of the SEC’s scrutiny lies the allegation that Binance.US may have had a backdoor allowing control over customer assets. The investigation is part of a larger SEC’s case against Binance. 

The SEC’s lawsuit, filed in June, accused Binance and Zhao of operating illegal securities exchanges and being involved in a complex web of fraudulent activities, including diversifying customer assets.

Binance Asks for Termination of the SEC’s Probe

During a recent status hearing in federal court on Monday, attorneys for Binance.US petitioned U.S. Magistrate Judge Zia Faruqui to consider terminating the SEC’s ongoing investigation. 

Judge Faruqui suggested that the recent guilty pleas made it less likely for Zhao to misuse U.S. customer assets. He expressed a need for closure in the case, stating, “At some point, I have to make a leap of faith and say enough is enough.”

The lawsuit has had a significant impact on Binance.US. The site’s attorneys, including Matthew Laroche, reported a substantial downturn in the platform’s financial health due to the legal battle. Binance.US has witnessed an almost 90% decline in the average monthly value of its assets and has lost nearly half of its monthly users since the SEC initiated its case. 

Laroche emphasized to the court that there is no evidence to suggest that any assets have been misused.

On the Flipside

  • Despite Binance’s legal troubles, many analysts believe that the exchange is set to maintain its dominance in the near future. 
  • Interestingly, the $4 billion Binance settlement did not cause a major stir in the market. Bitcoin and other major cryptos only saw limited movements in the immediate aftermath of the news. 

Why This Matters

The SEC’s continued investigation into Binance, even post-DOJ settlement, illustrates the broader impact of regulatory actions on market confidence. The outcome of this investigation will set significant precedents for the governance and oversight of crypto exchanges. 

Read more about Binance’s SEC settlement: 
Here’s What Binance’s $4B Settlement and CZ’s Resignation Means

Read more about the Euro stablecoin market: 
Euro Stablecoin Market Set to Explode, Says Tempo France

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.