Two months after commodity market regulators in the?US sued Binance?and its CEO for "wilful evasion of US law",?more trouble is set to be in store?for the world¡¯s biggest cryptocurrency exchange.
The?U.S. Securities and Exchange Commission?(SEC) alleged on Monday that Binance and its CEO, Changpeng Zhao, operated a "web of deception" that included artificially inflating its trading volumes and diverting customer assets.?For the unversed, the SEC is an independent agency of the United States federal government whose primary purpose is to enforce the law against market manipulation.?
The agency sued Binance and Zhao on Monday for failing to restrict U.S. customers from its platform and misleading investors about its market surveillance controls, as well as for operating an unregistered securities exchange.
The SEC¡¯s complaint, filed in federal court in Washington, D.C., also alleged that Binance and Zhao?secretly controlled customers' assets, allowing them to commingle and divert customer funds, and that Binance created separate U.S. entities as part of an elaborate scheme to evade U.S. federal securities laws, as per a Reuters report.
The SEC also alleged that from at least September 2019 until June 2022, Sigma Chain, a trading firm owned and controlled by Zhao, engaged in wash trading that artificially inflated the trading volume of crypto asset securities on the Binance US Platform.
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"We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law, said SEC Chair Gary Gensler said in a statement.
In a tweet,?Binance¡¯s CEO Zhao said that Binance would issue a response once it has reviewed the SEC's complaint and said the exchange's team is "standing by, ensuring systems are stable, including withdrawals and deposits."
Binance's?cryptocurrency BNB, the world's fourth-largest by market size, has been down nearly 9% in the past few days.
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This move is the latest in a series of legal woes for Binance, which was also sued by the U.S. Commodity Futures Trading Commission (CFTC) in March for operating what the regulator alleged were an "illegal" exchange and a "sham" compliance program, with Zhao calling those charges "disappointing and an incomplete recitation of facts.?
Binance is also under investigation by the Justice Department for suspected money laundering and sanctions violations, according to people familiar with the probe.?
Binance's global trading platform, Binance.com, dominates the crypto trading landscape; last year, it processed trades worth about $65 billion a day with up to 70% of the market, as per a Reuters report. The firm has processed at least $10 billion in payments for criminals and companies seeking to evade U.S. sanctions.
Last month, it was also reported that Binance mixed its customers' funds with its corporate revenues in a Silvergate Bank account belonging to trading firm Merit Peak, in breach of U.S. financial rules that require client money to be kept separate.?However,?Binance denied mixing customer deposits and company funds, saying that users who sent money to the account were not making deposits but rather buying Binance¡¯s bespoke dollar-linked crypto token.
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