US SEC sues Binance for deception, crypto market takes a hit

Cryptocurrencies and shares in blockchain-related firms experienced a sharp decline following the US Securities and Exchange Commission’s (SEC) lawsuit against Binance, the world’s largest crypto exchange. The SEC accused Binance and its CEO Changpeng Zhao of secretly controlling Binance.US, inflating trading volumes, diverting customer funds, and failing to restrict US customers from its platform. This has led to a drop in Bitcoin’s value, as well as Binance’s own cryptocurrency.

The lawsuit, filed in a federal court in Washington, DC, is the latest in a series of enforcement actions by the SEC to regulate the cryptocurrency industry, which SEC Chair Gary Gensler has labelled as “the wild West”. This crackdown has prompted crypto companies to enhance compliance, cease certain products, and expand their operations overseas.

John Reed Stark, a former chief of the SEC’s Office of Internet Enforcement, commented, “This is yet another targeted attack that is devastating in the crypto ecosystem. Pretty soon, the SEC won’t have anyone left to sue.”

Binance expressed disappointment with the SEC’s decision to litigate, stating that it had been cooperating with the regulator’s investigations and attempting to reach a negotiated settlement. The SEC’s aggressive approach towards the crypto industry has led to several companies facing legal challenges, including Bittrex, Kraken, and Coinbase Global.

James Angel, a finance professor at Georgetown University, warned that many big crypto companies are now “in a heap of trouble” and should be hiring the best regulatory counsel available, reports Channel News Asia.

The ongoing regulatory actions in the US highlight the need for safeguards in the crypto market to meet investor and customer expectations, according to Rajeev Bamra, senior vice president and head of decentralised finance and digital assets strategy at Moody’s Investors Service. He added, “Consequently, these charges have the potential to reshape the regulatory landscape for digital assets.”