US SEC sues crypto firms Binance and Coinbase
The US Securities and Exchange Commission (SEC) has filed charges against cryptocurrency heavyweights Binance and Coinbase this week amid an apparent crackdown on crypto.
The regulator has filed 13 charges against Binance Holdings, which operates the largest crypto asset trading platform in the world – Binance.com – along with US-based affiliate BAM Trading Services (which together with Binance operates the crypto asset trading platform Binance.US) and Binance’s founder Changpeng Zhao.
The allegations include “operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities”.
The news follows the US Commodity Futures Trading Commission (CFTC) filing a lawsuit against Binance and Changpeng Zhao back in March.
“Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” comments SEC chair Gary Gensler.
Gensler continues: “As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied.
“They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value US customers on their platforms.”
In a blog post, Binance says it is “disappointed” in the move and intends to “defend our platform vigorously”.
“From the start, we have actively cooperated with the SEC’s investigations and have worked hard to answer their questions and address their concerns,” says Binance.
“Today’s action is another in a line of examples where, as with other crypto projects facing similar suits, the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology.”
The exchange adds that it will “continue to cooperate with regulators and policymakers in the US and across the globe because that is the right thing to do”, adding: “We will work alongside industry partners to defend this important technology from misguided lawsuits.”
Coinbase also facing changes
Crypto exchange Coinbase has also been charged by the SEC for allegedly “operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency” and for “failing to register the offer and sale of its crypto asset staking-as-a-service program”.
The SEC alleges that Coinbase has made “billions of dollars” by “unlawfully facilitating” the buying and selling of crypto asset securities since 2019.
“As alleged in our complaint, Coinbase was fully aware of the applicability of the federal securities laws to its business activities, but deliberately refused to follow them,” says Gurbir Grewal, director of the SEC’s division of enforcement.
“While Coinbase’s calculated decisions may have allowed it to earn billions, it’s done so at the expense of investors by depriving them of the protections to which they are entitled. Today’s action seeks to hold Coinbase accountable for its choices.”
In a tweet, Coinbase CEO Brian Armstrong said: “Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it.
“Btw, in case it’s not obvious, the Coinbase suit is very different from others out there – the complaint filed against us is exclusively focused on what is or is not a security. And we are confident in our facts and the law.
“We’ll get the job done. In the meantime, let’s all keep moving forward and building as an industry. America will get this right in the end.”