SEC whale hunting cryptocurrency binance coinbase probe filing complaint whalers

SEC Hunts Crypto Whales: Binance & Coinbase

By BTCghost | The Crypt | 9 Jun 2023


whalers bitcoin binance sec coinbase

SEC Whalers Set Their Sights on Crypto Leviathans

whales bitcoin coinbase binance sec


Cryptoverse-Shattering News:  The SEC has filed Legal Actions against both Coinbase and Binance.  Based on their 101 page and 136 page Electronic Case Filings, respectively, the SEC is demanding the District Federal Court convene a jury trial for both cases.

In a significant development for the cryptocurrency market, the US Securities and Exchange Commission (SEC) has filed very serious civil actions complaints against Binance and Coinbase, the two most prominent cryptocurrency exchanges, likely in the world, with a combined user base of around 200 million people, both known for their extensive offerings, high profile clients and advanced trading mechanisms leaving them virtually unmatched as far as competition goes in the Crypto Trading Universe.  Both exchanges have amassed billions of dollars in profits over the last few years.  Now, the Securities and Exchange Commission, the Federal Government Agency responsible for regulating securities and safeguarding investor interests throughout the country, has filed legal actions against both exchanges, allegeding very serious breaches of various United States Federal Securities Laws.

So, let's delve into the details of these lawsuits and shed some light on what exactly is being alleged by the United States Federal Government, and we will also explore any potential implications for crypto industry-wide from these charges.  And most importantly if you have accounts or crypto on those exchanges, should you take it out?  We'll be back at 11pm to tell you.  Haha, seriously though...



In all seriousness though, the SEC has released this information on their website regarding customers assets in Binance:


Washington D.C., June 6, 2023 —

The Securities and Exchange Commission today filed an emergency action application seeking a temporary restraining order freezing assets, directing defendants to repatriate assets held for the benefit of customers of the Binance.US crypto trading platform, and seeking other emergency relief against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings, Inc., and their founder, Changpeng Zhao, to ensure that Binance.US customers’ assets are protected and remain in the United States through the resolution of the SEC’s pending litigation of this matter.


As part of the SEC’s emergency motion, the SEC seeks (1) an order to show cause why a preliminary injunction should not be granted as to the defendants; (2) an order freezing the assets of BAM Management; (3) an order directing the defendants to repatriate assets held for the benefit of BAM Trading's or BAM Management’s (together “BAM”) customers; (4) an order for other relief concerning the custody and control of BAM customers’ assets; (5) an order prohibiting the destruction of records by the defendants; (6) an order requiring sworn accountings of certain assets from the defendants; (7) an order authorizing expedited discovery from the defendants; and (8) an order granting alternate means of service.




The Allegations Against Coinbase

Based on the Electronic Case Filing, the SEC's argument is pretty straightforward and, if true, makes me wonder if Coinbase Executives are that absent-minded or just plain brazen to think they could get away with something like this.  Here is what the SEC states on page one:

Coinbase operates a trading platform (the “Coinbase Platform”) through which U.S.
customers can buy, sell, and trade crypto assets. The assets that Coinbase makes
available include crypto asset securities. Coinbase is the largest crypto asset
trading platform in the United States and has serviced over 108 million customers,
accounting for billions of dollars in daily trading volume in hundreds of crypto
assets. The Coinbase Platform merges three functions that are typically separated
in traditional securities markets—those of brokers, exchanges, and clearing agencies.
Yet, Coinbase has never registered with the SEC as a broker, national securities
exchange, or clearing agency, thus evading the disclosure regime that Congress has
established for our securities markets. All the while, Coinbase has earned billions
of dollars in revenues by, among other things, collecting transaction fees from
investors whom Coinbase has deprived of the disclosures and protections that
registration entails and thus exposed to significant risk.

Basically, the SEC's primary beef with Coinbase revolves around the claim that the company is operating an unregistered securities exchange. This allegation draws a parallel between Coinbase and independent stock exchanges like the Nasdaq, highlighting the absence of regulatory oversight in Coinbase's operations. By failing to register as a securities exchange, Coinbase may have violated crucial regulatory requirements that aim to protect investors and ensure fair trading practices.  If Coinbase were found guilty of operating an unregistered securities exchange, the potential penalties could include fines, injunctions, and possibly even criminal charges. The exact penalties would depend on what the District Federal Court deems as the severity of the offense, the extent of harm caused to investors, and other factors. In cases like this, fines can range from tens of thousands of dollars to millions of dollars, depending on the specific circumstances involved.  In some instances, individuals or companies may also face imprisonment for violating securities laws. It's worth noting that the SEC has broad authority to bring enforcement actions against individuals and companies that violate securities laws, so the penalties in this case could be significant.


Complaint SEC vs Coinbase PDF

smh coinbase

The Allegations Against Binance:

Similar to Coinbase, Binance is also facing the charge of operating an unregistered securities exchange. However, the SEC has gone a step further by levying additional accusations against Binance. These include misappropriation of billions of dollars in customer funds for CEO, CZ's (Changpeng Zhao) trading firm, misleading customers, providing false information to regulators.  To add insult to injury, the evidence against Binance is not only embarrassing, but a clear indicator that the company knows they've been violating securities laws in the USA for years.  Specifically, a 2018 internal chat log from none other than Binance's Compliance Officer, stating to a colleague, "We are operating a fking unlicensed securities exchange in the USA bro."  It is also important to mention the fact that the SEC's filing against Coinbase is simply, the SEC versus the company, Coinbase.  The Binance filing is the SEC against Binance and Binance US, BAM Trading Services and Managment, as well as CZ himself also listed as a codefendant.



Complaint SEC vs Binance PDF

SEC Request to Freeze Binance US Assets




I always stood behind Binance whenever I used their platform, and that's simply because I never had a problem with that exchange. I never had one problem withdrawing, never had one problem with any investment I ever made. In fact I'll take that a step further, when I was actually regularly using Binance, I made significant profits.  Not that I need to advertise my credentials or "prove" that I actually traded significantly on that exchange, but what is the point of having proof, if you never show it to anyone.  Binance and I go way back.  Check these out:

binance trading wizard

They don't give those awards out anymore.  Back on track.
btc bitcoin trader binance wow


What puts me on this trip down Binance nostalgia lane, is something that I read in the SEC probe that kind of hurts.  Accusations of wash trading.  The document claims it has only occurred on the Binance.US platform, but still.  WASH TRADING?  Eh... really puts a damper on the whole thing for me.  If you aren't sure what wash trading is, I will clarify for you: 

  • Wash trading refers to the illegal practice of artificially creating trading activity by executing buy and sell orders for the same asset to manipulate market conditions. 
  • Here is an example with me selling apples at a farmer's market:
    • I go to the local farmers market every week to sell my apples.  Open up my little stall where I sell them, and there are other vendors nearby selling different fruits.  Now the thing is, my apples, not so special.  As a matter of fact I ate one this morning and almost choked to death because it tasted like trash.  Nevertheless, apples is all I got bro, so I got to sell them!  So, in order to make my crap-tastic regular-ish apples sell quickly I need to create the appearance of high demand.  Which people will assume; HIGH DEMAND=MAGIC APPLES; thusly influencing them to actually buy the crap apples. So I have to collaborate with my friend ROBOTFACE who will be purchasing very large numbers of apples from me. I'll make sure ROBOTFACE approaches me at peak times of day, so the large purchases are witnessed by many people in the market. 
    • But here is where the trickery comes in, instead of actually consuming or using the apples, ROBOTFACE immediately returns them back to me for a refund or credit at the end of the day when no one is looking. This process is repeated multiple times, creating a cycle of buying and selling the same apples between ROBOTFACE and me.
    • Now, from an outsider's perspective, it may seem like there is significant demand for my apples because of the constant transactions taking place. Other customers might be influenced by this activity and believe that my apples are magical, potentially made by the maker of Jack's Beanstalk.  Since they appear highly sought after, it leads them to purchase the apples themselves.
    • However, in reality, the transactions are artificial and solely aimed at manipulating the perception of market activity.  So the fake sales led to real sales.  I used this example to illustrate how easily this could be done in the trading world, because "ROBOTFACE" doesn't even have to exist really.  Especially if you wash trade programmatically or have multiple companies with employees who can do it for you.  Wash trading artificially inflates trading volume and creates a false impression of market demand. Which is highly illegal, immoral and very, I don't know, scumbag-ish, is the best way I can describe it. 
    • Whether it is to pump a shitcoin, or to showcase what now looks like fictional volume, dominating the entire market like this: 

binance volume tradingbinance trading volume

We want real magic, not fake magic, example:







The impact on investors and the crypto industry resulting from the lawsuits against Binance and Coinbase is likely going to be significant. Firstly, these lawsuits have raised concerns about the safety of assets held on exchanges, and the overall stability of the crypto market. Investors are now questioning the reliability of the platforms they trade on. This uncertainty may lead to a decrease in investor confidence and slow down the growth of the cryptocurrency market.  Now personally speaking, I never had a problem on Binance, however had I knew these sorts of things were occurring behind the scenes, eh, I don't know, maybe I think twice about trading on the exchange.

Second both exchanges are now faced with the challenge of rebuilding trust by demonstrating their commitment to compliance. Their ability to address the SEC's allegations and implement necessary changes to align with regulatory standards will be crucial in determining their future prospects.

Thirdly, the lawsuits have broader implications for the entire cryptocurrency market. Increased regulatory scrutiny can impact market dynamics and industry innovation. It might lead to the introduction of new compliance measures, licensing requirements, and enhanced reporting obligations for crypto exchanges. These developments, while potentially beneficial in terms of investor protection, may also introduce additional barriers for new entrants and smaller players in the industry.

In conclusion, the SEC's lawsuits against Binance and Coinbase highlight the pressing need for regulatory clarity and compliance within the cryptocurrency market. The outcome of these lawsuits will shape the future landscape of crypto trading and the level of investor confidence in digital asset exchanges.

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