By
Chimamanda U. Martha
April 25th, 2024
According to the SEC in a recent lawsuit, Binance deliberately broke several rules and secretly funneled customer funds via a separate entity.
The US Securities and Exchange Commission (SEC) has slammed Binance with a lawsuit for varying malpractices. In addition to accusing Binance of mishandling customers’ funds, the commission’s lawsuit also fires at several altcoins, including Polygon (MATIC) and Solana (SOL).
The SEC’s lawsuit hit Binance and its CEO Changpeng “CZ” Zhao with 13 civil charges. According to the suit, Binance has not properly restricted US customers from its Binance.com platform, stating that the company sidesteps this rule for its “high-value US customers”. In addition, the SEC said Binance misappropriated billions of dollars worth of user funds using Sigma Chain, a separate entity in Zhao’s control.
The complaint states that Binance’s revenue from June 2018 to July 2021 was at least $11.6 billion.
According to the SEC, Binance knowingly committed these offenses for profits. SEC Division of Enforcement director Gurbir S. Grewal noted in a statement:
“We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits.”
The SEC filed the complaint at a Washington federal district court on Monday.
Binance Responds to SEC Lawsuit
In a public response to the SEC, Binance expressed disappointment at the commission’s lawsuit. The exchange claims it has always cooperated with the SEC through all its investigations, and answered all questions put forward. Binance then decried the lawsuit, saying that the SEC abandoned all “good-faith discussions” and decided to litigate instead.
According to the exchange, the SEC deliberately refuses to clarify its position, suggesting that the obscurity is powering the commission’s crackdown. Binance said:
“While we take the SEC’s allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. We intend to defend our platform vigorously.”
The response also said the SEC lawsuit’s allegations that Binance risked users’ funds are false. Regardless, Binance promised to keep interfacing with all regulators in and out of the US.
SEC Says Cardano, Solana, and BNB are Securities
In the SEC’s lawsuit, the commission designated several altcoins within and outside the Binance ecosystem as securities. In addition to many other cryptocurrencies it previously considered securities, the SEC said BNB, BUSD, Cardano’s ADA, and Polygon’s MATIC tokens qualify. Other tokens mentioned include Solana, Cosmos, Decentraland, Axie Infinity, COTI, The Sandbox, Filecoin, and Algorand.
Shortly after the SEC’s lawsuit became public, several of the tokens lost value. However, the SOL token tanked the most, losing over 6% to trade at $20.14 less than an hour after. Now, over the last 24 hours, SOL has fallen 7.26%, while MATIC has lost 8.37%. ADA, ALGO, and BNB have all fallen 7.15%, 9.48%, and 11.17%, respectively.