The Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, the world’s largest crypto exchange, its CEO Changpeng Zhao, and its U.S.-based affiliates, BAM Trading and BAM Management, for allegedly lying to regulators and investors about their operations and offerings.
The SEC accuses Binance and Zhao of operating unregistered national securities exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities, including Binance’s own crypto assets, such as BNB, BUSD, crypto-lending products, and a staking-as-a-service program.
The SEC also alleges that Binance and Zhao secretly allowed high-value U.S. customers to trade on the Binance.com platform, despite publicly claiming that they were restricted from doing so. Moreover, the SEC claims that Binance and Zhao secretly controlled the Binance.US platform behind the scenes, while misleading investors about its independence and compliance.
According to the SEC, Binance and Zhao also commingled billions of dollars of customer assets with their own funds and diverted them to third parties, such as Sigma Chain and Merit Peak Limited, which are also owned by Zhao. The SEC alleges that Binance and Zhao failed to protect customer assets from theft, loss, or misuse, and engaged in manipulative trading that artificially inflated the platform’s trading volume.
The SEC’s lawsuit seeks permanent injunctions, disgorgement plus interest, civil penalties, and an officer-and-director bar against Zhao. The SEC’s Chair Gary Gensler said in a press release: “Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Binance has not yet issued a formal response to the lawsuit. However, Zhao tweeted on Monday: “We are aware of the SEC’s allegations and are reviewing them carefully. We have always operated with transparency and integrity, and we will continue to do so. We are confident that we have complied with all applicable laws and regulations in every jurisdiction where we operate.”