- The SEC has filed an amended complaint against Binance, adding allegations of wash trading
- Other new claims involve the misrepresentation of investor protections on Binance.US, particularly surveillance systems that were promised but never implemented
- The updated filing includes more details on the extent of CEO Changpeng Zhao’s control over U.S. operations, emphasizing efforts to evade U.S. regulatory oversight
The Securities and Exchange Commission (SEC) last week amended its complaint against Binance, adding additional charges involving wash trading and investor misrepresentation. The amended complaint alleges that the exchange misled investors about the controls on Binance.US, while CEO Changpeng Zhao exercised substantial control behind the scenes. The filing underscores Zhao’s intentional efforts to evade U.S. laws, exposing further misconduct by the crypto giant.
Binance Allegedly Engaged in Wash Trading Through Third Party
The SEC’s amended filing against Binance, its U.S. affiliates, and CEO Changpeng Zhao, sees several notable changes. The most significant addition is the accusation that Binance engaged in “wash trading” through a trading firm controlled by Zhao, Sigma Chain AG. The complaint claims that from 2019 to 2022, Sigma Chain executed fake trades on Binance.US to artificially inflate the platform’s trading volume, deceiving both retail and institutional investors.
Another critical aspect of the amended complaint involves false claims about the safeguards in place on Binance.US. The SEC asserts that Binance promised investors robust surveillance systems to prevent market manipulation, but these controls were either non-existent or severely lacking.
The complaint reveals that Zhao and his team intentionally misled investors, raising millions of dollars while operating without the advertised protections.
Zhao’s Control Scrutinized
The amended filing further emphasizes the extent of Zhao’s control over Binance’s U.S. operations. Despite public claims that Binance.US was an independent entity, the SEC alleges that Zhao directed key operations, making critical business decisions while also overseeing efforts to bypass U.S. regulations. For example, Binance allegedly encouraged high-value U.S. clients to use VPNs to avoid detection, allowing them to continue trading on Binance.com despite supposed geographic restrictions.
As of October 2024, Binance.US is facing severe operational challenges due to ongoing regulatory scrutiny. Several states, including Washington, North Dakota, Oregon, and Florida, have revoked or suspended the platform’s operating licenses. Binance.US has also halted onboarding new users in states like Georgia, Ohio, and Connecticut. Additionally, the platform is unable to operate in key markets such as New York, Texas, and Hawaii, significantly limiting its U.S. footprint.
