(Reuters) – Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao operated a “network of deception” that included artificially inflating its trading volumes and diverting customer assets, the U.S. Securities and Exchange Commission said on Monday. .
The agency sued Binance and Zhao on Monday for failing to restrict U.S. customers from using their platforms, misleading investors about their market surveillance controls, and operating an unregistered securities exchange.
The SEC lawsuit in federal court in Washington, D.C. also accuses Binance and Zhao of secretly controlling client assets, allowing them to mix and transfer client funds, and that Binance created a separate U.S. entity” As part of an elaborate scheme to evade U.S. federal securities laws.”
The SEC also alleges that, from at least September 2019 to June , Sigma Chain, a fake trade by Zhao that artificially exaggerated the trading volume of cryptoasset securities on the Binance.US platform.
SEC Chairman Gary Gensler said in a statement: “We allege that Zhao and the Binance entity engaged in a broad web of deceit, conflicts of interest, lack of disclosure, and willful evasion. legal action”.
Binance did not immediately respond to a request for comment on the allegations. In a tweet, Zhao stated that once Binance reviews the SEC complaint, it will respond, saying that the exchange’s team is “on call to ensure system stability, including withdrawals and deposits.”
Binance’s cryptocurrency BNB, the world’s fourth largest by market size, fell more than 5% on the news.
The move is the latest in a series of legal woes for Binance, which was also sued by the U.S. Commodity Futures Trading Commission (CFTC) in March for operating what the regulator accused of operating an “illegal” exchange and “fake “Exchange” compliance program, Zhao called the allegations “disappointing” and “an incomplete statement of facts.”
The DOJ has also been charged with money laundering and violations, according to Sanctions mandate an investigation into Binance.
Binance, the world’s largest cryptocurrency exchange, was founded in Shanghai by CEO Changpeng Zhao, a Canadian Citizen, born and raised in China up to 23 years old.
While its holding company is in the Cayman Islands, Binance says it has no headquarters, and declined to disclose the location of its main Binance.com exchange.
Binance’s global trading platform, Binance.com, dominates the cryptocurrency trading space, processing approximately 70 billion in transactions with a volume of 2022 % market share.
As previously reported by Reuters, the firm has sought Criminals and companies evading U.S. sanctions processed at least 10 billions of dollars in payments.
Reuters also reported in May 23 that Binance was commingling its customers’ funds with its Silvergate firm’s earnings in bank accounts belonging to trading firm Merit Peak, violating the U.S. financial rules that require client funds to be kept separate.
Binance denies mixing client deposits with company funds, saying there are no deposits to the account, but instead purchases of Binance’s custom USD-pegged crypto token .
