New lawsuit against the world's largest crypto exchange Binance

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Co-founder Changpeng Zhao: "We will vigorously defend ourselves"

Photo: COSTAS BALTAS / REUTERS

As recently as March, the U.S. financial regulator sued Binance on suspicion that the world's largest crypto platform was deliberately flouting laws. Now co-founder Changpeng Zhao is being sued by the U.S. Securities and Exchange Commission (SEC).

"Zhao and the Binance companies are involved in an extensive web of deception, conflicts of interest, lack of disclosure and calculated circumvention of the law," said SEC Chairman Gary Gensler. Among other things, the authority accuses Binance of operating an unlicensed stock exchange. In addition, the company misled investors about its market surveillance controls and failed to keep U.S. customers away from its platform.

Other allegations revolve around the manipulation of stock exchange turnover with the help of bogus transactions and the diversion of customer funds. The company has also set up U.S. subsidiaries specifically to circumvent laws. According to industry service CryptoCompare, the exchange, which was founded in 2017, processed $23 trillion in transactions last year.

Investors spooked

Binance called the allegations unfounded. "We will defend ourselves vigorously." All customer funds at Binance and affiliated crypto exchanges such as Binance.US are safe. Nevertheless, investors reacted with fright. The cyber currency Binance Coin collapsed by a good ten percent, according to the industry service CoinMarketCap.com the fourth largest in the world with a market capitalization of about 43.7 billion dollars. Bitcoin and Ethereum lost about five percent each.

The financial regulator, in turn, is taking action against Binance because the platform is deliberately circumventing laws. The internal compliance program is only a sham. The company had also rejected these allegations.

In addition, an appeals court had halted Binance.US's takeover of insolvent crypto exchange Voyager for the time being to give authorities more time to examine the legality of the deal. According to the public prosecutor's office and the bankruptcy watchdog, the approval would have approved allegedly illegal securities transactions.

In addition, investigators accuse Binance of money laundering and circumventing billions of dollars in sanctions. U.S. authorities banned the company from issuing more digital coins of the Binance USD currency.

apr/Reuters