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Binance said that although it takes the SEC’s actions seriously, it will defend its position in the court “vigorously”.
In its filing with the US federal court in Washington, the SEC also accused Binance of mishandling investor funds as well as misleading investors and regulators. The SEC also accused the crypto exchange of flouting KYC rules while letting Americans trade in an unsecured and unprotected environment.
In the filing, Gurbir S. Grewal, Director of the SEC’s Division of Enforcement wrote:
“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. By engaging in multiple unregistered offerings and also failing to register while at the same time combining the functions of exchanges, brokers, dealers, and clearing agencies, the Binance platforms under Zhao’s control imposed outsized risks and conflicts of interest on investors.”
Interestingly, the SEC complaint also accuses Binance of creating Binance.US as a shield for the main company. For years, Binance has maintained that Binance.US and its global exchange operate independently of each other. However, the SEC claims that this is not the case.
“While Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for US investors, Zhao and Binance secretly controlled the Binance.US platform’s operations behind the scenes,” the SEC said.
Binance to Defend Itself in Court with the SEC
Binance called the SEC action “disappointing” and said that it always wanted to engage in good-faith negotiations in order to settle this matter. It also called out the SEC for not providing enough clarity in crypto regulations. 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.”
As we know, crypto exchange Binance is already facing a lawsuit from the US CFTC, filed earlier this year in March, over the alleged violations of derivatives rules. Binance believes that this regulatory action motivated the SEC. “Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a US regulatory tug-of-war,” the company said.
Interestingly, the SEC has cited two former Binance CEOs who expressed concerns over Zhao’s level of control. As per CNBC, both have testified before the SEC, however, none have been named. “I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left,” a former Binance.US CEO identified as “BAM CEO B” testified to the SEC.
However, several crypto industry members have intended support for Binance. Cardano chief Charles Hoskinson said that it’s time for crypto players to unite and fight against the SEC’s authoritarianism.