SEC Charges Binance Entities and Founder Changpeng Zhao with Numerous Securities Law Violations – Lawsuit Highlights

2 mins read
  • The Securities and Exchange Commission (SEC) has filed 13 charges against Binance Holdings Ltd., BAM Trading Services Inc., and their founder Changpeng Zhao, accusing them of several securities law violations.
  • Allegations include operating unregistered national securities exchanges, broker-dealers, and clearing agencies.
  • Binance and BAM Trading are also charged with the unregistered offer and sale of Binance’s own crypto assets, such as exchange token BNB, stablecoin Binance USD (BUSD), crypto-lending products, and a staking-as-a-service program.
  • Zhao is also being accused as a controlling person for Binance’s and BAM Trading’s operation of unregistered national securities exchanges, broker-dealers, and clearing agencies.
  • The SEC alleges that despite public claims, Zhao and Binance secretly allowed U.S. customers to continue trading on Binance.com and that they controlled the operations of the Binance.US platform.
  • Binance and Zhao are also accused of mishandling customer assets, including commingling funds and diverting them to an entity owned by Zhao, called Sigma Chain, as well as to Merit Peak Limited.
  • BAM Trading and BAM Management US Holdings Inc. are alleged to have misled investors about the non-existent trading controls on the Binance.US platform.
  • The SEC accuses Binance entities and Zhao of conducting deceptive practices, conflicts of interest, lack of disclosure, and evasion of the law.
  • The complaint filed by SEC alleges that since at least July 2017, Binance.com and Binance.US have operated as exchanges, brokers, dealers, and clearing agencies, and have earned at least $11.6 billion from transaction fees from U.S. customers.
  • Binance is charged for the unregistered offers and sales of BNB, BUSD, and crypto-lending products “Simple Earn” and “BNB Vault.”
  • The complaint alleges that Binance created BAM Management and BAM Trading to evade U.S. federal securities laws and maintained substantial involvement and control over the U.S. entity.
  • The SEC claims that BAM Trading and BAM Management misled Binance.US customers concerning market surveillance and controls to detect and prevent manipulative trading on the Binance.US platform.

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