Binance, the world’s biggest cryptocurrency exchange, and its CEO and founder Changpeng Zhao are being sued by the US Securities and Exchange Commission (SEC) for allegedly failing to restrict US customers from its platform and misleading investors about its market surveillance controls as well as for operating an unregistered securities exchange, Reuters reported on Monday.
The SEC’s complaint, filed in federal court in Washington, DC, also accused Binance and Zhao of secretly controlling customers’ assets, allowing them to commingle and divert customer funds, “as they please.”
As well, the SEC alleged that from nearly three years ago until June 2022, a trading company owned and controlled by Zhao, Sigma Chain, engaged in so-called ‘wash trading’ that artificially inflated the trading volume of crypto asset securities on the Binance.US platform.
“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.
A Binance spokesperson countered in a blog post on the company’s website, writing: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”
The announcement likely contributed to the 6% decline in the price of Bitcoin Monday, while Binance’s own cryptocurrency BNB was off more than 5%.
Reuters previously reported that Binance has processed at least $10 billion in payments for criminals and companies seeking to evade US sanctions.
Binance processed cryptocurrency trades worth about $65 billion a day last year, which was up to 70% of the market.
The cryptocurrency exchange was founded in Shanghai in 2017 by Zhao, who was born and raised in China until the age of 12 but is now a Canadian citizen.
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