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The biggest subject in the broader digital currency ecosystem involves the new lawsuit the United States Securities and Exchange Commission (SEC) filed against Binance, the industry's biggest trading platform. As experts tried to make sense of the 13 counts levied against the trading platform, one prominent piece of evidence against Binance stands out.
According to the SEC, Binance was operating in the United States illegally through the BAM Management and BAM Trading entities, both of which were established in September 2019. The regulator pointed out that Binance claimed its U.S. offshoot operated as an independent trading outfit, with U.S. customers unable to trade on the exchange's global platform.
The regulator revealed in its lawsuit that it discovered the significant involvement of Binance and Changpeng "CZ" Zhao in the U.S. arm and that CZ directed the exchange to allow high-value U.S. clients to continually access the Binance.com platform.
While all these may be deemed as mere allegations, the market regulator cited a statement from the exchange's chief compliance officer back in 2018 when he said in a message a colleague that:
‘[w]e are operating as a fking unlicensed securities exchange in the USA bro.’
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
Godfrey BenjaminBinance exchange: Possible ways out
It is not uncommon to find the U.S. SEC or even the Commodity Futures Trading Commission (CFTC) going against crypto entities and, in most instances, a settlement follows.
Earlier in the year, the SEC accused Kraken exchange of violating securities law through its staking product, and it had to resolve the case with a $30 million fine. While Binance has the option to pursue settlement with the regulator, the exchange has reiterated its plans to defend itself against the SEC in what may appear as a pending legal battle.
With Ripple Labs Inc not exploring a settlement, its case with the SEC is still pending since 2020, and following legal redress it may prove time-consuming and costly for Binance.
Arman Shirinyan
Alex Dovbnya
Dan Burgin
Vladislav Sopov