Binance SEC Lawsuit – Five Things We Know

Reading Time: 2 minutes

Binance was yesterday sued by the Securities and Exchange Commission (SEC) on multiple charges relating to how it operates in the US, with bans and a multi-million dollar penalty possible if the company are found guilty.

Here are the main takeaways from yesterday’s action.

Operating an Illegal Exchange

Binance has been accused of operating an illegal exchange by not registering with the SEC as required by law, allowing it to evade regulatory oversight. The SEC has also charged Binance with commingling customer assets and redirecting billions of dollars of customer funds into an account controlled by CEO Changpeng Zhao.

SEC Wants Binance and Zhao Banned

In the lawsuit, the SEC says it wants to ban Binance, Binance.US and Zhao from operating in the US, as well as levying a presumably hefty fine and disgorgement. This demand is the second existential threat facing Binance in the US following the Commodity Futures Trading Commission (CFTC) accusing the exchange of “willful evasion of federal law” in March.

SEC Broker-dealer Plan Bears Fruit

Binance and Binance.US have been accused of taking part in “unregistered offers and sales” of crypto asset securities and behaving like an “exchange, broker-dealer, and clearing agency” without prior registration. Just four months ago, the SEC said it was going to go after platforms it said were acting as broker-dealers, and it looks like it has been good to its word.

12 Cryptos Named as Securities

The lawsuit identified a further 12 cryptocurrencies as being securities, according to the SEC. These “include but are not limited to” BNB, BUSD, SOL, ADA, MATIC, FIL, ATOM, and SAND. This is another example of the SEC claiming that cryptocurrencies are securities without giving the projects relating to those coins a chance to respond, let alone a court hearing to decide on the matter.

Binance Says SEC Refused to Engage

In an all too familiar tale, Binance argued that the SEC refused to “productively engage” with them when the pair were discussing a negotiated settlement, arguing that rather than negotiating the SEC “instead chose to act unilaterally and litigate.” Other exchanges have reported similar experiences with the SEC, which has frequently asked crypto companies to “come in and talk to us”.