In a statement, cryptocurrency exchange Binance expressed disappointment with the allegations made by the U.S. Securities and Exchange Commission (SEC), claiming mishandling of funds, operating as an unregistered exchange, and selling unregistered securities. Binance had been discussing with the SEC to reach a negotiated settlement, but the SEC decided to pursue litigation instead.
Binance emphasized its disappointment: “Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations. But despite our efforts, with its complaint today, the SEC abandoned that process and instead chose to act unilaterally and litigate. That choice disheartens us.”
Binance.US, a separate entity, also disagreed with the SEC’s allegations, tweeting, “Simply put, today’s filing is unjustified by the facts, by the law, or by the Commission’s precedent.” The exchange referenced Coinbase’s ongoing legal battle with the SEC, suggesting that the lawsuit represents the Commission’s use of enforcement and litigation rather than a thoughtful and nuanced approach needed for this dynamic and complex technology.
Binance raised concerns about the SEC unilaterally labelling certain tokens and services as securities, even when other U.S. authorities assert jurisdiction, stating that this exacerbates existing problems.
Coinbase, another prominent cryptocurrency exchange, is currently in a legal dispute over the definition of crypto regulation with the SEC. Binance directly opposed the SEC’s allegations that Binance.US had commingled user funds and reassured its users that their assets were “safe and secure.”
The SEC’s lawsuit against Binance alleges that the exchange, under the leadership and control of CEO Changpeng Zhao (CZ), and its affiliate BAM Trading, unlawfully provided essential securities market functions, such as exchange, broker-dealer, and clearing agency services, without registering with the SEC. The lawsuit claims that Binance and BAM Trading knowingly chose not to register to evade regulatory oversight intended to protect investors and maintain the integrity of markets.
The lawsuit further alleges that billions of dollars in customer funds from both Binance platforms were commingled into an account controlled by Zhao and Binance. According to the SEC’s claims, these funds were subsequently transferred to a third party, seemingly connected to the buying and selling of cryptocurrency assets.
The legal battle between Binance and the SEC will draw significant attention within the cryptocurrency community and regulatory circles. As the industry evolves, discussions surrounding the appropriate regulatory framework for cryptocurrencies and exchanges will likely intensify.
