SEC Sues Cryptocurrency Exchange Binance Alleging Violations Of U.S. Securities Laws

The U.S. Securities and Exchange Commission (SEC) has filed a complaint against cryptocurrency exchange Binance, accusing the company of violating federal securities laws.

The SEC alleges that Binance, the world’s largest cryptocurrency exchange platform, unlawfully solicited U.S. investors to trade crypto asset securities on its platforms, Binance.com and Binance.US. Per the complaint, Binance engaged in unregistered offers and sales of securities and made false representations to investors regarding surveillance and controls over manipulative trading.

According to the SEC’s claim, Binance and its subsidiary, BAM Trading, operated as an exchange, broker-dealer and clearing agency without registering with the SEC. The commission also alleges that Binance conducted unregistered offers and sales of its own cryptocurrency assets, as well as profit-generating programs and investment schemes. Specifically, the charges focus on the BNB and BUSD cryptocurrencies launched by Binance, as well as the BNB Vault and Simple Earn programs, “and a so-called ‘staking’ investment scheme available on the Binance.US Platform.” The defendants are accused of depriving investors of material information about these securities and programs.

Furthermore, the complaint states that Binance and BAM Trading made misrepresentations about the controls implemented on the Binance.US platform, raising significant amounts of money from private investors. The SEC asserts that Binance evaded U.S. laws and regulation by implementing a plan to surreptitiously escape registration requirements. “As Zhao himself acknowledged—Binance did not want to ‘be held accountable’ for these actions,” the filed charges explain. “As the Binance CCO explained, ‘[o]n the surface we cannot be seen to have US users[,] but in reality, we should get them through other creative means.’”

In a response to the SEC's complaint, Binance expressed disappointment and emphasized its active cooperation with the SEC's investigations. Binance stated that it had engaged in extensive discussions to reach a settlement but that the SEC chose to act unilaterally. The company said it intends to vigorously defend its platform and criticized the SEC's enforcement approach, calling for more clarity and guidance for the digital asset industry. Binance also refuted allegations that user assets on the Binance.US platform were at risk, assuring customers of the safety and security of their funds.

The SEC seeks various remedies and resolutions, including a permanent injunction, disgorgement of ill-gotten gains, civil money penalties and equitable relief.