Binance self-interested billions of dollars, secretly transferring customers’ money to the company controlled by CEO Changpeng Zhao

The US Securities and Exchange Commission (SEC) has accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds. The fact that the company lies to US regulators and investors about the size of its operations is also said to put the cryptocurrency industry at risk of being re-established.

The allegation marks the second SEC lawsuit this year against Binance, alleging that the exchange shirked its responsibility to protect US investors. The regulator has long considered Binance, with an average daily trading volume of $65 billion, a key objective in promoting the crypto industry to transparency and regulation.

In the 136-page complaint, the SEC said that Binance mixed up billions of dollars in customer funds, then secretly sent them to a separate company called Merit Peak Limited controlled by Binance founder Changpeng Zhao.

The complaint also claims that Binance misled investors about its system to detect and control manipulative transactions as well as its efforts to restrict US users on international platforms. These people only have access to Binance.US – a company specifically established to operate in the US.

“ Binance and Mr. Zhao have enriched themselves with billions of dollars while putting investors’ assets at risk, ” the regulators said in a civil lawsuit filed in Federal District Court in New York. Washington.

In a recent post, Binance claimed to have tried to negotiate a settlement with the regulators, and expressed “disappointment” and “displeasure” at the SEC’s decision to sue. The exchange said “this was a mistake” and vowed to fight back “strongly”.

According to The New York Times, the allegations are the latest move by regulators to curb the expansion of cryptocurrency transactions and force “big players” to comply with US laws. Sam Bankman-Fried, the founder of FTX, a rival exchange to Binance before it filed for bankruptcy, also faced trial in October following a series of allegations. In recent months, the SEC has also taken administrative sanctions against several crypto lenders.

“US regulators are posing quite a few challenges for Binance and continue to keep an eye on the crypto world,” said Reena Aggarwal, a professor of finance at Georgetown University.

Binance is under a lot of pressure. In March, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance and Mr. Zhao. The Department of Justice is also investigating the exchange on suspicion of money laundering. Attorney David Silver said the SEC complaints “revealed the dark side of cryptocurrencies” as well as the fact that Binance “deceived customers for years”.

In total, the SEC brought 13 charges against Binance and Mr. Zhao. The agency is also seeking compensation from Binance and prevents CZ from leading any US-registered business.

“We allege that Zhao and Binance purposefully evaded regulations and put customers and investors at risk,” said Gurbir S. Grewal, Director of SEC Enforcement.

It is known that the CFTC is seeking to permanently expel Binance from the US. The agency and the SEC regularly cooperate with investigations, but it is unclear which names will play a key role in regulating cryptocurrency transactions.

Not stopping there, Binance is also accused of hiding its connection to China for many years, according to the Financial Times. This is in stark contrast to previous statements by the CEOs that the cryptocurrency exchange had left the mainland following an industry-wide crackdown in late 2017.

Accordingly, CEO Changpeng Zhao and several senior leaders repeatedly directed Binance employees to conceal the company’s activities in China, including an office used until at least the end of 2019 and a Chinese bank used to pay employees.

In 2017, China began to tighten operations related to the cryptocurrency market, causing more than 60 exchanges to fall under the radar. Many exchanges based in China have to announce moving abroad to avoid being closed. Binance confirmed to completely stop operating in this country.

However, in fact, this exchange is still secretly operating in the country of billions of people, even trying to hide the scope and location of its operation when it is “snooped” by the regulator. Binance is also said to “deliberately” not disclose the location of its executive offices to evade regulation.

At the end of 2019, Binance employees were reminded: “ Binance has offices in Malta, Singapore and Uganda. Please do not confirm information about any other office, including China ”.

On March 27, the CFTC filed a lawsuit in federal court, accusing Binance and some of its leaders of regularly breaking trading rules in the process of becoming the largest cryptocurrency exchange in the world. The CFTC also accused Binance of instructing US customers to use VPNs to circumvent the law on using the exchange’s services.

“ The United States is in the midst of a major geopolitical competition. The Committee on Foreign Investment in the United States (CFIUS) is concerned about any deal involving China ,” the Financial Times quoted a former CFIUS official as saying.

By: The New York Times, FT