Binance and CZ now facing a lawsuit, the regulator labels 61 cryptos as securities

The FTX chaos had jolted the entire cryptoverse. It seems that now another crypto giant is under the radar of regulators. Binance, the world’s largest cryptocurrency exchange, and its billionaire co-founder and CEO, Changpeng Zhao (CZ) are being sued by the US financial watchdog, the Securities and Exchange Commission (SEC).

Today we charged Binance Holdings Ltd. (Binance); U.S.-based affiliate, BAM Trading Services Inc., which, together with Binance, operates https://t.co/swcxioZKVP; and their founder, Changpeng Zhao, with a variety of securities law violations.https://t.co/H1wgGgR5ir pic.twitter.com/IWTb7Et86H

— U.S. Securities and Exchange Commission (@SECGov) June 5, 2023

13 charges filed against Binance and Zhao

The SEC has filed 13 charges against Binance, accusing the crypto exchange of operating an illegal trading platform in the US and at the same time, misusing consumer funds. In a 136-page complaint, which has been filed in the U.S. District Court for the District of Columbia, the agency alleged that the crypto exchange's American affiliate, Binance.US, and CZ have been operating unregistered US financial institutions, and misleading investors about the companies’ risk controls, inflating trading volumes and mixing “billions of dollars of investor assets” and secretly sending them to a separate company controlled by its CEO.

The SEC's lawsuit has engendered a wave of negative sentiment within the crypto community. Investors and market participants are understandably cautious about the potential regulatory consequences resulting from the SEC's actions. The lawsuit serves as a stark reminder of the regulatory scrutiny that looms over the crypto industry. It comes in the wake of a series of regulatory measures aimed at bolstering oversight and ensuring investor protection. Consequently, the SEC's intervention has further intensified the ongoing conversation surrounding the need for enhanced regulation within the crypto space.

Mr. Rajagopal Menon, Vice President, WazirX

Gary Gensler, SEC’s Chair, has stated, “Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” He further added, “They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so they could keep high-value U.S. customers on their platforms."

Ultimately, the SEC's lawsuit against Binance serves as a stark illustration of the increased regulatory scrutiny faced by the crypto industry. The case aligns with a broader trend of regulatory actions taken to bolster oversight and safeguard investors' interests. As the industry continues to evolve, regulatory authorities are actively working to establish a comprehensive framework that balances innovation with investor protection. The SEC's lawsuit against Binance represents a significant development in this ongoing regulatory landscape, underscoring the need for greater compliance and accountability within the crypto market.

Mr. Rajagopal Menon, Vice President, WazirX

SEC labels 61 cryptos as securities

The regulator has declared approximately 61 cryptocurrencies as securities, with the most recent 10 being added through its lawsuit against Binance. These include Binance USD, Cardano, Solana, Polygon, The Sandbox, Decentraland, Axie Infinity, and Cosmos, among others.

It must be noted that the SEC had earlier deemed several other cryptos as securities, such as Ripple's XRP, LBRY Credits, and Algorand.

Gary Gensler has mentions that in his view, "everything other than Bitcoin" falls under the agency's jurisdiction as a security.