Investigating the complaint of the United States Stock Exchange Commission against Binance and Zhao; What was Binance’s response?
Yesterday, the US Securities and Exchange Commission filed a broad complaint against the Binance exchange and its affiliates due to the violation of securities regulations in this country.
This case is one of the biggest complaints of this commission against a company active in the field of digital currencies. In the continuation of this article based on a report It is written from the website of Crypto Asset, we will briefly examine the most important claims and points raised in the complaint against Binance, as well as the response of the authorities of this exchange. It should be noted that none of the claims of the Stock Exchange Commission have been accepted by the court Not confirmed or denied.
1. BNB and BUSD are securities
In this case, the United States Stock Exchange Commission has claimed that the digital currencies associated with the Binance team, including Binance Coin (BNB) and Binance USD (BUSD), are considered securities, as well as staking plans in the international and American sectors (Binance.US). This exchange is mentioned as services related to securities.
The US Securities and Exchange Commission also says that Binance and its US division failed to register their portfolio as an exchange, broker or legal agency in the US, when they were required to do so.
2. Other tokens considered securities
The American Exchange Commission claims that other tokens are traded on Binance, which are also securities. Among these tokens are Solana, Cardano, Paligan, FileCoin, Cosmas, Sandbox, Dicentraland, Elgorand, OxyInfinity and Coty.
The SEC’s argument is that these tokens were originally “sold in the form of an investment contract and are therefore considered securities.” Although these tokens were not directly offered by Binance, the US Securities and Exchange Commission sued Binance for facilitating their transactions.
3. Referring to Zhao’s role in the American sections
According to the Stock Exchange Commission file, Changpeng Zhao, Binance group, “BAM firm Trading” as the parent company of Binance’s American division and other related parties are all responsible for violating securities regulations in this country and should be sentenced to dismissal and payment of fines.
The US Securities and Exchange Commission also wants to bar Zhao from acting in certain managerial roles. It is also requested that Binance and its affiliates be prohibited from operating in the field of securities, digital assets subject to the Securities Act, and related businesses.
4. Binance has defied US regulations
The Exchange Commission says Binance has marketed specifically to attract American customers since it began operations in 2017, and these activities continued secretly after restricting access to the exchange’s international section for American users in 2019.
Binance is said to have blocked US customers’ access to its main platform with the advice of a consultant, but at the same time secretly showed some users ways to bypass these restrictions.
5. Binance managers have been aware of the situation of the exchange
The director of Binance’s customer department, who was not named in the Stock Exchange Commission file, made statements that show that he was aware of these Binance errors. He apparently said in 2018 that Binance was operating as an unregistered and unauthorized stock exchange in the United States. He also said in 2020 that Binance (the international division) does not want to submit to legal supervision, and that is why its regional divisions (such as the American division) were launched.
According to the Exchange Commission, Zhao personally directed the Binance team to encourage users to bypass regional restrictions and authentication procedures.
The American Exchange Commission also says that Zhao and Binance were aware of the large number of American customers of this exchange, and the statistics obtained from the presentations within this collection show that there were 1.4 million American users on Binance in 2019.
6. Companies owned by Zhao control the assets of the American division
The US Securities and Exchange Commission says Zhao and his companies own 100% of Binance’s affiliates.
Although Zhao is said to not personally own the full ownership of the US subsidiaries of BAM, he and Binance have significant control over the bank accounts and cryptocurrency deposits of the users of these groups.
Merit Peak and Sigma Chain companies are also said to have been used to move tens of billions of dollars between Binance and its US divisions.
The US government body also said Zhao and Binance’s international division were involved in the design, launch, recruitment and trading activities of its US companies.
7. Prevalence of fake transactions on Binance
The United States Exchange Commission has finally claimed that the US divisions of Binance have misled their users by exaggerating about the fight against fake exchanges (Wash Trading) and controlling transactions.
According to the organization, many fraudulent transactions have occurred by Sigma Chain due to its role as a market maker. The Exchange Commission says accounts affiliated with Sigma Chain at one point made bogus transactions for 48 of the 51 newly listed tokens and at another point for 51 of the 58 newly listed tokens.
It is also said that despite the promises of Binance, there was no system to monitor the transactions of the American parts of this complex until February 2022 (Bahman 1400). Managers have not taken any action despite being aware of fake transactions in these sectors.
The regulatory body believes that transaction data is important information for Binance users and investors, and that US affiliates have benefited from its misleading statements.
What was Binance’s response?
Binance at the beginning Response Regarding the complaint of the US Stock Exchange Commission, he regretted that despite Binance’s continuous efforts to interact with the legislators and respond to them, he chose to file a legal complaint, and this action is an example of the US Stock Exchange Commission’s refusal to provide transparency. It is more legal in the digital currency industry.
Binance says that instead of taking a rational approach to dealing with the dynamic and complex technology of digital currencies, the Exchange Commission has used the weapon of litigation and other companies are also facing these wrong actions by this institution.
According to Binance, in its complaint, the Exchange Commission has introduced digital currencies and services as securities that other US authorities have approved, and this creates more knots.
In addition, Binance has denied any claims that the funds of Binance’s American platform users were at risk and has said that it will vigorously defend itself against these claims. Binance has also said that the main goal of the US Stock Exchange Commission was never to protect investors, and if that was the case, the employees of this organization would have taken action to interact with Binance to prove the security and safety of the American part of this exchange.
Despite all these differences, Binance has said in the end that it takes the claims of the Exchange Commission seriously and will continue to cooperate with American and international regulators. Also, the Binance team considered itself a non-American exchange and said that this is why the recent action of the Stock Exchange Commission will have a limited effect on their activities.