SEC: Binance Founder Zhao Inflated Volumes, Diverted Assets in Deceptive Practices

In a recent development, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, the world's largest cryptocurrency exchange, and its CEO Changpeng Zhao.

The SEC accuses Binance of engaging in deceptive practices, including inflating trading volumes and diverting customer assets. The agency claims that Binance failed to restrict U.S. customers from its platform, misled investors about its market surveillance controls, and operated an unregistered securities exchange. Furthermore, the SEC alleges that Binance and Zhao secretly controlled customer assets, allowing them to mix and divert customer funds. The SEC also asserts that a trading firm owned by Zhao, called Sigma Chain, engaged in wash trading to artificially increase the trading volume of crypto assets on the Binance.US Platform.

SEC Chair Gary Gensler commented on the matter, stating, "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."

Binance and Zhao have yet to issue an official response to the charges. Zhao mentioned in a tweet that the exchange would provide a response after reviewing the SEC's complaint and assured users that the exchange's systems, including withdrawals and deposits, are stable.

The news of the SEC lawsuit had an immediate impact on Binance's cryptocurrency BNB, causing it to drop more than 5% in market value.

It is worth noting that Binance has been facing a series of legal challenges recently. In March, the U.S. Commodity Futures Trading Commission (CFTC) sued the exchange, alleging it operated an "illegal" exchange and a "sham" compliance program. Binance is also currently under investigation by the U.S. Department of Justice for suspected money laundering and sanctions violations.

Binance, founded in 2017 by Changpeng Zhao, is the largest cryptocurrency exchange globally. Although its holding company is based in the Cayman Islands, Binance does not disclose the location of its main Binance.com exchange or have a headquarters.

In previous reports, Reuters stated that Binance processed at least $10 billion in payments for companies and criminals looking to evade U.S. sanctions. It also reported that Binance commingled customer funds with corporate revenues in a Silvergate Bank account, which goes against U.S. financial regulations requiring client money to be kept separate. Binance has denied mixing customer deposits with company funds, claiming that users who sent money to the account were purchasing Binance's dollar-linked crypto token.

By fLEXI tEAM