FOR IMMEDIATE RELEASE 2023-101 - Binance us Update
Washington D.C., June 5, 2023 — The Securities and Exchange Commission (SEC) has filed charges against Binance Holdings Ltd. ("Binance"), its U.S.-based affiliate BAM Trading Services Inc. ("BAM Trading"), and their founder Changpeng Zhao for multiple securities law violations.
The SEC alleges that Binance and Zhao falsely claimed that U.S. customers were restricted from trading on Binance.com while secretly allowing high-value U.S. customers to continue trading. Additionally, the SEC claims that Binance and Zhao concealed their control over the operations of Binance.US, a platform supposedly created as a separate entity for U.S. investors.
Furthermore, the SEC asserts that Zhao and Binance had control over customers' assets, including diverting them to Sigma Chain, an entity owned and controlled by Zhao. The SEC also accuses BAM Trading and BAM Management US Holdings Inc. of misleading investors about the trading controls on Binance.US and claims that Sigma Chain engaged in manipulative trading to inflate the platform's trading volume.
The charges filed by the SEC also include violations of registration-related provisions of the federal securities laws. Binance and BAM Trading are accused of operating unregistered national securities exchanges, broker-dealers, and clearing agencies. They are also charged with the unregistered offer and sale of Binance's own crypto assets, including BNB and BUSD, as well as certain crypto-lending products. Zhao is held liable as a control person for the operation of unregistered national securities exchanges, broker-dealers, and clearing agencies by Binance and BAM Trading.
SEC Chair Gary Gensler stated, "Zhao and Binance misled investors about risk controls, manipulated trading volumes, and concealed critical information about the platform's operation. They attempted to evade U.S. securities laws by announcing false controls while disregarding them behind the scenes. Investing with or on these unlawful platforms should be avoided."
Gurbir S. Grewal, Director of the SEC's Division of Enforcement, added, "Zhao and the Binance entities consciously evaded the rules, endangering customers and investors to maximize their own profits. By engaging in multiple unregistered offerings and combining the functions of exchanges, brokers, dealers, and clearing agencies, they imposed significant risks and conflicts of interest on investors."
The SEC's complaint, filed in the U.S. District Court for the District of Columbia, alleges that Binance.com and Binance.US, under Zhao's control, operated as exchanges, brokers, dealers, and clearing agencies. The SEC claims that Binance should have registered as an exchange, broker-dealer, and clearing agency for Binance.com, and Binance and BAM Trading should have registered as an exchange and clearing agency for Binance.US. BAM Trading should have also registered as a broker-dealer. Zhao is held liable for the registration violations of Binance and BAM Trading.
The SEC also charges Binance for the unregistered offers and sales of BNB, BUSD, and crypto-lending products, as well as BAM Trading for the unregistered offer and sale of Binance.US' staking-as-a-service program.
The complaint highlights that Binance created BAM Management and BAM Trading to evade U.S. securities laws, falsely claiming that BAM Trading operated independently and that U.S. customers couldn't access Binance.com. In reality, Zhao and Binance maintained control over the U.S. entity and allowed high-value U.S. customers to trade on Binance.com. The complaint cites a message from the Binance chief compliance officer acknowledging the operation of an unlicensed securities exchange in the U.S.
BAM Trading and BAM Management are accused of misleading Binance.US customers and equity investors about market surveillance and controls. The complaint alleges that Sigma Chain, an undisclosed market maker owned by Zhao, engaged in wash trading, exposing the falsity of BAM Trading's statements about market surveillance and controls.
The investigation into the violations related to the Binance.US platform was conducted by the SEC's Kathleen Hitchins, Ann Rosenfield, and Colby Steele, supervised by Paul Kim. The investigation into the violations related to the Binance.com platform was conducted by Michael Baker, Donna K. Norman, and Martin Zerwitz, supervised by Deborah A. Tarasevich. The SEC's Crypto Assets and Cyber Unit overseen by Jorge G. Tenreiro and David Hirsch led both matters. The litigation is being led by Matthew Scarlato, Jennifer Farer, and J. Emmett Murphy, supervised by David Nasse, Olivia Choe, and Mr. Tenreiro.
**Please note that this information is taken directly from the official SEC press release and has not been altered in any way.**
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