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Again; Binance accused of ‘web of deception’ in US

Binance, the world’s largest cryptocurrency exchange, has been accused by US financial regulators of breaking the country’s investment laws and operating a “web of deception”.

  • The Securities and Exchange Commission (SEC) alleges that Binance and its founder Changpeng Zhao ignored the rules meant to protect investors to keep operating in the US.
  • The SEC’s complaint accuses Binance of artificially inflating trading volumes, misleading investors over “non-existent” controls, and diverting funds to entities owned by Changpeng Zhao, its chief executive.
  • The SEC also alleges that Binance secretly controls customers’ assets, allowing them to commingle and divert customer funds, and that Binance created separate US entities “as part of an elaborate scheme to evade US federal securities laws”.
  • The lawsuit from the SEC follows an earlier complaint by another financial regulator, the Commodity Futures Trading Commission, which filed charges against Binance earlier this year.
  • Bina.nce founder Changpeng Zhao said his firm had not seen the charges and that the company would respond once it had seen the complaint.

What are the specific charges against Binance and its CEO Changpeng Zhao

The Securities and Exchange Commission (SEC) has filed 13 charges against Binance and its founder Changpeng Zhao.

The charges include the following:

  • Unlawfully offering three essential securities products in the US without registering them.
  • Misleading investors about Binance’s ability to detect market manipulation.
  • Misusing customer funds and sending some of that money to a company controlled by Changpeng Zhao.
  • Creating separate US entities “as part of an elaborate scheme to evade US federal securities laws”.
  • Secretly controlling customers’ assets, allowing them to commingle and divert customer funds.
  • Operating an unregistered securities exchange.
  • Operating an unregistered broker-dealer.
  • Operating an unregistered clearing agency.
  • Violating “critical” provisions of federal security laws, including self-dealing and market manipulation, through Merit Peak Limited, which Zhao controlled and owned.
  • Subverting “their own controls” to allow high-net worth investors and customers to continue trading on Binance’s unregulated international exchange.
  • Engaging in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.
  • Showing a “blatant disregard” of federal law.
  • Willful evasion of US law.

How have investors reacted to the charges against Binance

Investors have reacted negatively to the charges against Binance and Changpeng Zhao.

The SEC’s allegations have been described as “scathing”, and the charges have dealt a big blow to the US crypto industry.

SEC Chair Gary Gensler has warned the public to beware of investing in “these unlawful platforms”.

Binance has said that it is cooperating with the SEC’s investigation but has criticized the agency for failing to provide sufficient rules for crypto companies operating in the US.

The allegations against Bina.nce have been described as “very serious”.

How has the cryptocurrency market been affected by the charges against Binance

The charges against Binance and Changpeng Zhao have had a negative impact on the cryptocurrency market.

Bitcoin’s price fell after the news of the SEC charges.

The charges have also dealt a big blow to the US crypto industry.

The SEC’s allegations against Bina.nce include mishandling funds, lying to regulators, and violating securities laws.

The SEC has accused Binance of secretly sending billions of dollars in customer funds to a separate company controlled by Changpeng Zhao.

The charges have led to negative market sentiment, and the crypto community has expressed disappointment with the allegations against Binance.

However, some investors believe that the impact of an eventual shutdown of Bina.nce operations in the US is irrelevant.

What is Sigma Chain? and how is it related to the charges against Binance and Changpeng Zhao?
The SEC has alleged that Sigma Chain engaged in wash trading on Binance.US

Sigma Chain is a trading firm owned and controlled by Changpeng Zhao, the founder of Binance.

The SEC has alleged that Sigma Chain engaged in wash trading on Binance.US from September 2019 to June 2022 in an effort to artificially inflate volume on the platform.

The SEC has also alleged that Binance commingled billions of dollars worth of user funds and secretly sent them to Sigma Chain.

  • The SEC has accused Sigma Chain of engaging in manipulative trading that artificially inflated the trading volume on Binance.
  • The SEC has alleged that Zhao had the freedom to “divert customer assets as they please” to Sigma Chain.

The SEC has accused Zhao and Binance of violating “critical” provisions of federal security laws through Merit Peak Limited, which Zhao controlled and owned.

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