SEC Charges Binance and CZ

The Securities and Exchange Commission (SEC) has intensified its actions against Binance, the largest cryptocurrency exchange globally, and its founder/CEO Changpeng "CZ" Zhao. The SEC has filed 13 charges against Binance, accusing the company of deceptive practices towards customers and improper use of funds. According to the SEC, Binance had control over customer assets and used them in ways that benefited the company. It is alleged that some of these funds were diverted to a separate entity owned by Zhao called Sigma Chain, which the SEC claims engaged in manipulative trading to artificially increase trading volume on Binance.US, a platform established for U.S. users.

Evidence presented in the complaint includes a January 2021 message from a Sales Director at BAM Trading, a U.S.-based Binance affiliate, to the CEOs and other employees. The message listed 20 Binance.US account numbers, stating that they were all related to Sigma Chain. One employee reportedly responded with surprise to this information. The SEC further alleges that Binance and its affiliates mixed billions of dollars of investor funds without proper disclosure, sending them to a third party named Merit Peak Limited, also owned by Zhao.

SEC Chair Gary Gensler, in a statement, highlighted the extensive web of deception, conflicts of interest, lack of disclosure, and intentional evasion of the law involving Zhao and Binance entities. The charges include misleading investors about risk controls, manipulation of trading volumes, concealing information about platform operations and affiliated market makers, and custody of investor funds and crypto assets.

Binance responded to the allegations through a statement on its blog, denying any risk to user assets on the Binance.US platform and affirming the safety and security of all user assets on Binance and its affiliate platforms.