Binance, the world’s largest cryptocurrency exchange, is now being sued by the Securities and Exchange Commission (SEC) on 13 separate charges.
It certainly feels like the entire world of crypto is in peril. Currently, cryptocurrency prices are at the lowest value they’ve been in the past three months, with controversy and scandal marring the industry's once-promising rise.
Now, if the Binance story goes the way of its predecessors/competitors, its value will plummet, insolvency will be declared, and founder Changpeng Zhao will be arrested. But let’s not get ahead of ourselves.
Binance Sued by SEC
The SEC announced that it was suing the cryptocurrency exchange Binance on 13 different charges, including misleading investors and misusing customer funds.
“Through thirteen charges, 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.” – Gary Gensler, SEC Chair
Zhao has pointed out (via Twitter) that the SEC’s powers are limited, as the Cayman Islands-based exchange clearly isn’t based in the US.
Binance's Previous Legal Troubles
While it isn’t clear exactly which charges (if any) will stick, what is clear is that this isn’t the first time the exchange has faced legal trouble.
In March, the US Commodity Futures Trading Commission (CFTC) sued Binance and Zhao for a slew of charges, including:
- Willful evasion of US law
- A compliance program the CFTC described as “ineffective,” “illegal,” and “a sham.”
- Regulatory arbitrage for Binance’s commercial benefit
Zhao and Binance have both denounced the CFTC’s claims in a statement posted on the company’s blog.
That’s not all, though. In December 2022, Binance was once again in the government’s crosshairs – this time with the US Department of Justice mulling over whether to hit the crypto exchange with several charges.
In an exclusive report, once again by Reuters, the potential charges were money laundering and criminal sanctions violations.
Just as with the CFTC’s claims, Binance and Zhao have refuted the claims, this time pronouncing on Twitter, “Reuters has it wrong again.” The company also tweeted a document it had prepared in response to the Reuters exclusive.
A Bad Year for the Cryptocurrency Industry
It's been a banner year for cryptocurrency – if by banner, you mean massive losses of both money and marketplace trust.
First, there was the Terra/Luna catastrophe in May, which resulted in an estimated $60 billion loss within a week. Shortly after, the founder of the Terra Network, Do Kwon, was arrested and is now out pending bail.
As if that wasn’t catastrophic enough, FTX filed for bankruptcy in November, citing a liquidity crisis. The collapse of the crypto exchange was partly wrought by it being hacked earlier in the year, and partly, according to 12 counts brought by a Manhattan court, due to some allegedly illegal activity.
On top of that, FTX’s founder, Sam Bankman-Fried, was arrested in December, and is now out on a $250 million bond.
At the time, Binance — FTX’s main competitor — seemed all-too smug about the news, even going as far as making a hostile takeover offer, then withdrawing it.
But now, Binance is in the hot seat with a likely similar outcome on the way.