Binance Crypto Exchange Violates Investor Protection Rules: SEC Files Lawsuit

Violation of investor protection rules by operating unregistered exchanges, misrepresenting trading controls or selling unregistered securities. The SEC has made several accusations, for which the crypto exchange and its boss will be held accountable before the American justice system.

“Zhao and Binance engaged in a vast web of fraud, conflicts of interest, lack of disclosure and calculated circumvention of the law, as we allege in a total of 13 indictments,” he said, according to Reuters SEC Chairman Gary Gensler on the case.

At the same time, Gensler warned the general public to beware “of investing your hard-earned money with their help.” He was referring to the Binance crypto exchange.

Zhao said on Twitter that his team would be looking into the situation. However, he did not comment further on the matter.

In a subsequent statement, the exchange said the lawsuit was without merit and that it intended to defend itself in court. According to representatives of the cryptocurrency company, the accusation that users’ assets are in any way at risk is also odd.

In addition, Binance representatives recalled that they have cooperated with the SEC for more than 2.5 years. They called again on the US Congress to “create an effective regulatory regime for digital assets”.

The US Commodity Futures Trading Commission (CFTC) sued the crypto exchange, including its managers and head, in March this year. According to the commissioners, from at least July 2019 until now, Binance “offered and executed commodity derivatives transactions on behalf of US persons.”

This is exactly how the stock exchange was supposed to violate American laws. “Binance has known for years that it was in violation of CFTC rules… It should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful circumvention of US law,” CFTC chief Rostin Behnam said at the time.

The court has not yet ruled on this lawsuit.

Binance is a dominant player in the digital asset market. According to the server CryptoCompare, which tracks the prices of cryptocurrencies as well as the activities of cryptocurrency companies, Binance processed $23 billion (CZK 505 billion) worth of trades last year. This is the most of all crypto exchanges.