US SEC charges Binance for violations to securities law

The company and founder both misrepresented their restrictions on US customers.

The US Securities and Exchange Commission (SEC) has charged Binance Holdings, touted as the world's largest crypto asset trading platform, and its US-based affiliate BAM Trading Services, along with their founder Changpeng Zhao, for multiple violations of securities laws.

In a filing last Monday, the US SEC alleges that Zhao and Binance misrepresented their restrictions on US customers, allowing high-value US customers to trade on Binance.com covertly. 

Additionally, they claim that Zhao and Binance maintained control over the operations of Binance.US, despite presenting it as an independent platform for US investors.

The SEC's allegations include claims that Zhao and Binance have control over customer assets on the platforms, allowing them to commingle or divert these assets, including to an entity owned by Zhao called Sigma Chain. 

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The complaint also states that BAM Trading and BAM Management misled investors regarding trading controls on the Binance.US platform, while Sigma Chain engaged in manipulative trading to artificially inflate trading volume. 

Furthermore, the defendants are accused of concealing the commingling of billions of dollars of investor assets and transferring them to a third-party entity, Merit Peak Limited, also owned by Zhao.

The complaint also accuses the defendants of violating important registration-related provisions of the federal securities laws listed in the filing.

“[Zhao and Binance] 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. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.” said US SEC Chair Gary Gensler.