Yesterday happened what we all were waiting for: SEC declared war on Binance. Gensler & Co filed 13 charges against Binance Entities and Founder Changpeng Zhao. i'll try to unpack some of these allegations:
a) Though Binance officials always asserted that US customers were restricted from transacting on Binance.com, this is not so. The biggest crypto exchange secretly allowed some high-value (i.e., those with lots of funds) to trade on Binance.com. Also, Binance.US is not as independent as Changpeng Zhao claimed it to be. Binance.US was set up as a separate trading platform for US investors. But in fact, Changpeng Zhao and other Binance officials operated Binance.US behind the scenes.
b) Another allegation is that the exchange commingled customers' assets "as they please". These assets were diverted to an entity called Sigma Chain, created and controlled by Changpeng Zhao. In order to artifically increase Binance's trading volume Sigma Chain engaged in manipulative trading. SEC also claims that investor funds were diverted to a third party, Merit Peak. The latter company is also owned by, as you can fugire out yourself, CZ.
c) The Complaint charges several accusations related to "critical registration-related provisions" of US federal securities laws. SEC attempts to establish BNB as a security. Their reasoning is that raising funds from BNB sale helped CZ and other Binance executives to build a world-class crypto exchange. Furthermore, as a security, the success of BNB depends on the expertise of CZ & Co.
d) Marketing of BUSD yield opportunities and the launch of "BUSD Reward program" breaks the law because they indicate that investors may have expected profit from the stablecoin. SEC claims that there was an unregistered offer and sale of BNB, BUSD and several other coins. Not unrelated to these accusations is BNB Vault and Simple Earn programs. They should be classified as securities under US laws because their performance depends on the expertise of the invesetment managers.
e) SEC's complaint also mentions BAM Trading and BAM Management US Holdings which misled investors. BAM holding deceived investors by ensuring them that are trading controls over the Binance.US trading platform while in fact there were none.
Let's see where the Complaints will lead to.
