In a striking turn of events, Binance, the world's largest crypto exchange, and its CEO Changpeng Zhao have been sued by the Securities and Exchange Commission (SEC) for allegedly breaching U.S. securities rules, as reported by Bloomberg.
The SEC's lawsuit alleges that Binance and associated entities under Zhao's leadership engaged in a series of actions that violated federal securities laws, such as offering unregistered securities trading platforms, unregistered crypto asset securities sales and fraud. The regulator suggests that Binance knowingly avoided regulatory oversight to enrich itself while putting investor assets at risk.
The defendants are also accused of secretly controlling U.S. operations and intentionally allowing high-value U.S. customers to circumvent controls meant to block U.S. users, thus evading U.S. regulation.
The lawsuit claims that Binance mixed and misused billions of customer dollars in a way that legal financial firms could not, putting U.S. investor money at risk. The suit concludes that these actions have violated multiple aspects of the Securities Act and the Securities Exchange Act.
BNB takes hit
The price of Binance's native BNB token plunged by more than 6% on the news. Notably, the SEC alleges that both BNB and BUST stablecoin are unregistered securities.
Amid all the pandemonium, CZ has taken to Twitter to address the damning lawsuit. The crypto boss remains defiant and confident in the face of the SEC's legal assault.
In his tweet, he once again emphasized that BNB is still the fourth biggest coin by market cap, in an attempt to demonstrate the firm's resilience in the face of adversity.
He also added that the Binance team is working to ensure system stability, including the processes of withdrawals and deposits.
"We will issue a response once we see the complaint. Haven't seen it yet. Media gets the info before we do," CZ further clarified, indicating that the news of the lawsuit had reached the media even before the Binance team. His message ended with a prayer emoji, hinting at a hopeful outlook.
More legal troubles
The SEC lawsuit marks another regulatory body's crackdown on the crypto giant, following a similar action taken by the U.S. Commodity Futures Trading Commission (CFTC) back in March. The CFTC accused Binance and its CEO of operating an "illegal" exchange with a "sham" compliance program, accusing them of intentionally evading U.S. law for commercial gain.
In the meantime, Bloomberg recently reported that the crypto giant, which is intensifying regulatory scrutiny and lawsuits, is reportedly considering Richard Teng, a seasoned executive with regulatory experience, as a potential successor to current CEO Changpeng Zhao.