the sec binance timeline

The US Securities and Exchange Commission (SEC) filed a lawsuit on Monday against Binance, and its founder and CEO, Changpeng Zhao over allegations that state they have violated federal securities laws.

For those who have yet to catch up on the saga. Let me tell you that this is not the first time. In 2023, Gary Gensler, president of the SEC, has gone after 4 exchanges (including Binance), and numerous projects, & forced crypto to establish in other countries.

The Relation Between The SEC and Crypto Industry

In recent years, the SEC has intensified its regulatory efforts within the crypto market. Following legal actions taken against Ripple and Coinbase, Binance has also found itself entangled in legal challenges. The recent lawsuit against Binance has resulted in the reclassification of 10 additional assets as securities.

In March 2023, the Commodity Futures Trading Commission (CFTC) filed a complaint against Binance and its CEO, Changpeng Zhao, in a federal court in Chicago. The complaint alleges that Binance offered crypto futures and derivatives to U.S. residents without registering these offerings with the CFTC. The lawsuit also accuses Binance’s former chief compliance officer, Samuel Lim, of aiding and abetting the company’s violations of U.S. law.

the sec sued binance

Source: Twitter

On the other hand, Binance also faced scrutiny for moving approximately $1.8 billion in assets to hedge funds between August and December 2022 without notifying customers. Despite previously telling customers that the tokens were 100% backed, the move raised concerns about transparency and trust.

Then, on June 5th, the SEC filed 13 charges accusing Binance of a bunch of from the past. Along with a few concerning stuff about CZ and his involvement in the regulations of the exchange. What did The SEC say? The SEC’s suit alleges that Binance and its founder Changpeng Zhao misused customers’ funds. For The SEC, the funds were internally used by Market makers that CZ “owned and controlled”. This enabled manipulative trading on the Binance US platform. This also diverted user funds to a CZ-owned entity called Sigma Chain that conducted “manipulative trading’ to inflate the volume of trading on the crypto exchange.

the sec binance sue

Source: SEC’s Suit
Binance/SEC Suit

According to the Suit, this is what happened:

  • Binance and Binance.US offered unregistered securities, such as the BNB token and BUSD stablecoin, to the public.
  • Binance and BAM Trading (operating company for Binance.US) are accused of failing to register as a clearing agency, broker, and exchange.
  • Claims that Binance enabled U.S. customers to trade on its platform, including assisting high-value customers in circumventing controls.
  • Binance and Zhao claimed the company’s U.S. subsidiary was independent, but alleged they controlled it behind the scenes.
  • The SEC also alleges that Binance’s staking service violated securities laws.

Note: The charges are not even criminal, the lawsuit is just a civil case. Unlike in the case of FTX and BitMEX, where there were criminal charges involved.

What does CZ have to say?

In response, Binance has published an official response to the SEC, claiming that it aims to unilaterally define crypto market structure.”. Zhao denied the allegations, calling the suit “unjustified” and one of many of the SEC’s “misguided actions” targeting crypto.

Binance’s CEO, Changpeng “CZ” Zhao, also retweeted a post highlighting that the SEC has taken more action against long-standing crypto entities than it ever did against the now-defunct centralized exchange FTX. CZ says they’re prepared to fight the SEC “to the full extent of the law” and urges to stay “strong together”.

cz binance seo

Source: Twitter

Binance takes it to Twitter and strongly denies the SEC’s claims, calling the lawsuit baseless, and intends to vigorously defend itself. They argue that the SEC’s actions seek to harm the industry and stifle innovation. Emphasizing the need for Congress to establish a workable regulatory framework for digital assets.

binance sec suit

Source: Twitter

There has also been an announcement that Richard Teng will be taking over as CEO of Binance in its Regional Markets, thereby replacing CZ.

What Do Other Market Players Say About This Situation?

“For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. This should be a warning to anyone in the digital asset world that the CFTC will not tolerate willful avoidance of U.S. law.” CFTC Chairman Rostin Behnam said in a statement.

binance sec suit

Source: Twitter
What Does It Mean for the Crypto Investors?

Coinbase’s shares have also tumbled so far on Monday, falling by more than 10.5% to $55.46. Crypto miner Riot Platforms Inc was off 8.8% while Marathon Digital was down 8.4%, and Hut 8 Mining was off 4.6%.

Although Binance outflows remain minimal despite the turmoil, with only 10K BTC withdrawn (1.5% decline). SEC’s regulatory actions cause a $50B loss in 12 hours. Investor protection efforts come at a cost, with $301.3M liquidated in 24 hours.

glassnode

Source: Glassnode

On-chain data shows that the exchange endured some $503 million in net outflows on Monday amid SEC charges. At one point Binance recorded $231 million more withdrawals (excluding Bitcoin) than deposits within a one-hour period following the news about the lawsuit.

on chain data

Source: Coindesk

The SEC’s investigation of 10 crypto assets is certainly detrimental. But it’s worth nothing that the largest instance of multiple cryptocurrencies being labeled as securities occurred earlier in February. This resulted in 16 crypto assets being affected, including Terra Luna Classic [LUNC], Terra Classic USD [USTC], and Mirror Protocol [MIR]. In addition, about 13 Mirrored Assets [mAssets] designed to replicate the price movements of stocks like Apple and Tesla were also classified as securities.

Others on SEC’s list include XRP, Algorand [ALGO], LBRY Credits [LBC], Gram [TON], DASH [DASH], OmiseGo [OMG], Naga [NGC], Monolith [TKN], IHT Real Estate [IHT], Power Ledger [POWR], Kromatica [KROM], DFX Finance [DFX], Amp [AMP], Rally [RLY], Rari Governance Token [RGT], DerivaDAO [DDX], XYO Network [XYO], Liechtenstein Cryptoasset Exchange [LCX], Kin [KIN], Salt Lending [SALT], Beaxy Token [BXY], DragonChain [DRGN], Tron [TRX], BitTorrent [BTT], Terra USD [UST], Luna [LUNA], Mango [MNGO], Ducat [DUCAT], Locke [LOCKE], EthereumMax [EMAX], Hydro [HYDRO], BitConnect [BCC], Meta 1 Coin [META1], Filecoin [FIL], Paragon [PRG], and AirToken [AIR].

What Should Crypto Investors Do?

The lawsuit news had a significant impact on the cryptocurrency market, with Bitcoin and Binance’s BNB token experiencing notable price drops (5.5% and 10.5% respectively)

Others on SEC’s list include XRP, Algorand [ALGO], LBRY Credits [LBC], Gram [TON], DASH [DASH], OmiseGo [OMG], Naga [NGC], Monolith [TKN], IHT Real Estate [IHT], Power Ledger [POWR], Kromatica [KROM], DFX Finance [DFX], Amp [AMP], Rally [RLY], Rari Governance Token [RGT], DerivaDAO [DDX], XYO Network [XYO], Liechtenstein Cryptoasset Exchange [LCX], Kin [KIN], Salt Lending [SALT], Beaxy Token [BXY], DragonChain [DRGN], Tron [TRX], BitTorrent [BTT], Terra USD [UST], Luna [LUNA], Mango [MNGO], Ducat [DUCAT], Locke [LOCKE], EthereumMax [EMAX], Hydro [HYDRO], BitConnect [BCC], Meta 1 Coin [META1], Filecoin [FIL], Paragon [PRG], and AirToken [AIR].

Conclusion

The lawsuit news had a significant impact on the cryptocurrency market, with Bitcoin and Binance’s BNB token experiencing notable price drops (5.5% and 10.5% respectively) The bearish sentiment is evident as the downward trend in BTC remains strong. Further downside movement is possible, with potential support at $26,000.

This indicates that the probability of a continued bearish trend remains high today. Therefore, it is important to keep a close eye on the $26,750 level, as it is likely to act as a key level for Bitcoin. A break below this level may allow investors to enter a strong selling position in Bitcoin.

However keep in mind, there are a lot of uncertainties, and the number of questions that we can ask right now is infinite, but all we can do is wait and watch what happens. Plus there’s no denying that a lot of accusations in the SEC charges seem extremely concerning.

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