{"id":18703,"date":"2023-06-06T02:26:39","date_gmt":"2023-06-06T06:26:39","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/sec-sues-binance-what-it-means-for-bitcoin-and-coinbase\/"},"modified":"2023-06-06T02:26:40","modified_gmt":"2023-06-06T06:26:40","slug":"sec-sues-binance-what-it-means-for-bitcoin-and-coinbase","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=18703","title":{"rendered":"SEC Sues Binance. What It Means for Bitcoin and Coinbase."},"content":{"rendered":"
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The U.S. Securities and Exchange Commission charged cryptocurrency exchange Binance and its founder, Changpeng Zhao, with a range of securities violations on Monday. <\/p>\n

This has struck a blow at the heart of crypto and the effect is rippling across markets.<\/p>\n

Bitcoin was down more than 5% in afternoon trading to about $25,700. Shares of
\n Coinbase Global
\n (ticker: COIN), the big publicly traded crypto exchange, were off 12% to about $57.<\/p>\n

\n

The SEC\u2019s action is a landmark move by regulators against one of the most important players in digital assets. Binance is, by far, the world\u2019s largest crypto exchange, and Zhao\u2014known in the industry as \u201cCZ\u201d\u2014is arguably the industry\u2019s single-most influential individual, playing a key role in the collapse of rival FTX last year.<\/p>\n

The SEC alleges that while Binance and Zhao publicly claimed that U.S. customers were restricted from using Binance\u2014the core, offshore trading venue\u2014the group is alleged to have bent controls to allow continued access to high-value customers. The agency also alleges that while Binance.U.S. was positioned as an independent, U.S.-based platform, in reality it was secretly controlled by Binance and Zhao.<\/p>\n

\u00a0SEC chairman Gary Gensler said in a statement: \u201cThrough thirteen charges, 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.\u201d <\/p>\n

The agency also claims that Binance exercises control of assets held on its platform, \u201cpermitting them to commingle customer assets or divert customer assets as they please, including to an entity Zhao owned,\u201d and that this has been concealed.\u00a0<\/p>\n

Until at least 2021, the complaint said, accounts in the name of Binance entities, beneficially owned by CZ, sent billions of dollars of customer assets to U.S.-based bank accounts in the name of an entity called Merit Peak. The use of Merit Peak as an intermediary \u201cpresented an undisclosed counterparty risk for investors,\u201d the SEC said.<\/p>\n

For traders, this allegations are likely to be shocking. The alleged commingling of customer money between FTX and an affiliated hedge fund, Alameda Research, controlled by Sam Bankman-Fried, was integral to the meltdown of that crypto exchange last November. Amid the market turmoil that ensued in the wake of FTX\u2019s collapse, more funds flowed into Binance in what was seen as a flight to quality.<\/p>\n

Binance said in a statement that it is \u201cdisappointed\u201d in the SEC\u2019s actions and will \u201cvigorously defend our business and the industry.\u201d The company added that it disagrees with the SEC\u2019s allegations that Binance operated as an unregistered securities exchange or illegally offered and sold securities.<\/p>\n

Binance added that all \u201cuser\u201d assets on Binance and affiliated platforms, including Binance.US, \u201care safe and secure.\u201d The company said it has restructured its business to help comply with regulatory requirements, and spent $80 million on \u201cexternal compliance partners\u201d over the last two years. <\/p>\n

Binance is a pillar of the digital asset economy, in some months commanding almost two-third of all crypto trading volumes, though it has recently shed some of its market share. A crisis at Binance threatens to undo remarkable gains for Bitcoin, up almost two-thirds this year.<\/p>\n

The news is also likely to have a negative impact on
\n Coinbase.<\/span>
\n While Binance has operated offshore for years and dodged requests from lawmakers to open up about its finances, Coinbase has positioned itself as crypto\u2019s answer to a blue-chip stock that plays by the rules. But Coinbase revealed in March that the SEC had sent it a so-called Wells notice, a warning the agency may sue the exchange. After Monday\u2019s developments at Binance, investors will have heightened concerns. <\/p>\n

Write to Jack Denton at jack.denton@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The U.S. Securities and Exchange Commission charged cryptocurrency exchange Binance and its founder, Changpeng Zhao, with a range of securities violations on Monday. This has struck a blow at the heart of crypto and the effect is rippling across markets. Bitcoin was down more than 5% in afternoon trading to about $25,700. Shares of Coinbase […]<\/p>\n","protected":false},"author":1,"featured_media":18704,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-18703","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nSEC Sues Binance. 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