On Monday, the Security and Exchange Commission (SEC) filed 13 charges against Binance, the largest cryptocurrency exchange in the world, as well as its cofounder Changpeng Zhao, for allegedly running their operation illegally, according to court filings.
According to the SEC’s filing, the government alleges that Binance operated an illegal cryptocurrency exchange, and Zhao commingled billions of dollars of customer deposits and distributed them to another of his business entities. The SEC said the defendants displayed a “blatant disregard of the federal securities laws and the investor and market protections these laws provide.”
The filing went on, “In so doing, Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”
The filing alleges that Binance and Zhao transferred investor’s crypto and fiat assets, including billion of US dollars which belonged to customers, to a company controlled by Zhao, Merit Peak Limited, incorporated in the British Virgin Islands, according to the filing.
According to the SEC filing, Samuel Lim, the chief compliance officer, acknowledged to another compliance official in December of 2018, “We are operating as a fking unlicensed securities exchange in the USA bro.”
The SEC lawsuit comes on the heels of a Commodity Futures Trading Commission (CFTC) lawsuit filed in March, which alleged that Binance and Zhao did not adhere to regulations.
In addition, it is alleged the company concealed it efforts to help certain high-value US customers continue to use their trading services, with Lim stating, “[O]n the surface we cannot be seen to have US users[,] but in reality, we should get them through other creative means.”
Allegedly, Zhao said that it was his “goal” “to reduce the losses to ourselves, and at the same time to make the U.S. regulatory authorities not trouble us.”
Binance.US said in a statement on Twitter, “We believe the lawsuit is baseless and we intend to defend ourselves vigorously… Today’s filing is unjustified by the facts, by the law, or by the Commission’s own precedent. The relief sought by the Commission would harm the very investors the SEC is charged with protecting.”
