(New York) The US financial market watchdog, the SEC, sued the world’s largest cryptocurrency exchange, Binance, and its boss, Changpeng Zhao, on Monday for regulatory circumvention.
According to the document filed in federal court in Washington, Binance notably let US residents use its platform even though the company was not registered with US authorities.
This is a new assault on Binance after the one launched by the American financial products regulatory authority, the CFTC, which had assigned it at the end of March for similar reasons.
The news caused Bitcoin, the largest cryptocurrency by value in circulation (over $500 billion), to drop nearly 2% in minutes.
As for the Binance Coin (BNB), cryptocurrency attached to the Binance platform and fourth digital currency by global valuation, it lost more than 5% of its value in less than an hour.
In a reaction posted on its site, Binance revealed that discussions had been held with the SEC in view of an amicable agreement, but that the regulator had “abandoned this process and decided to take legal action unilaterally”.
“The SEC’s rulings undermine the role of the United States as an international platform for financial innovation and leadership” in financial products, said the group, which has no identified headquarters in the world.
The SEC criticizes Binance for not having registered its platform, its own cryptocurrencies such as BNB or its other financial products in the United States.
The regulator also claims that contrary to what Binance has publicly argued, the American subsidiary and the funds deposited there by customers were controlled by the parent company.
It reports transfers from US subsidiaries to a company controlled by Changpeng Zhao, to an account that was later used to purchase a yacht.
Binance did not respond to the question of circumvention of the legislation, but assured that customer funds were not exposed to platform-specific risks. “We will vigorously contest any accusation” on this point, the company promised.
“(Changpeng) Zhao and Binance entities have been guilty of a series of deceptions, conflicts of interest, lack of transparency and calculated circumvention of the law”, argued the chairman of the SEC, Gary Gensler, quoted in a press release.
“Zhao and Binance not only knew the rules, but they intentionally chose to circumvent them, putting their customers and investors at risk,” added the one who has taken a punitive approach to big cryptocurrency players for several months. that do not register with the SEC.
In the absence of a vote on a regulatory framework in Congress, the SEC claims control over the regulation of cryptocurrencies, a status that the CFTC contests.
The procedure started on Monday should address the question of whether cryptocurrencies are indeed financial securities and whether the SEC has authority over them, which many dispute in the middle and beyond.
“Judging by these developments, it seems the SEC’s goal was never to protect investors,” Binance reacted, “but to make headlines. »
“It’s an attack on the whole industry,” Changpeng Zhao said.