Binance and CZ .VS. The SEC

On Monday, June 5th, the Securities and exchange commission filed a lawsuit alleging Binance Holdings and Cangepeng Zhao, the company's founder, of violating US securities laws. Following the SEC’s announcement of the lawsuit, the cryptocurrency market saw major volatility spikes, with Bitcoin dropping more than %5 from $26,800 to $25,540.

According to the filing by the SEC, Binance holdings is guilty of operating as an unregistered securities exchange, broker-dealer, and clearing agency.

SEC Takes On Binance: Lawsuit, Charges, and Implications for the Broader Crypto Market

On top of these allegations, CZ and Binance were accused of mishandling customer funds and misleading both regulators and investors on the operations process within the company. “As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied,” SEC chair Gary Gensler said in a statement.

Within the lawsuit filed by the SEC were new remarks that specify which assets are referred to as unregistered securities in the suit. According to the SEC, Binance is guilty of selling unregistered securities including “BNB, BUSD, and the units of each of the crypto asset securities further described below—with trading symbols SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI (collectively, the ‘Crypto Asset Securities’).”

As Binance and Changpeng Zhao work through the totalled 13 alleged charges, the company put out a crypto-forward statement regarding the issue saying “We will continue to cooperate with regulators and policymakers in the U.S. and across the globe because that is the right thing to do. And Binance remains committed to productive engagement to ensure the next generation of cryptocurrency regulation fosters innovation while implementing and ensuring important consumer protections.”

Binance Faces SEC Lawsuit: Allegations, Market Impact, and CZ's Response

Binance is the world's largest crypto exchange, and was the first to make transparency regarding liquidity reserves a standard in the industry. While crypto regulations seem to change at lightspeed, Changpeng Zhao and Binance have made the stance to productively work with regulators on any issues brought forward. Binance’s statement can be read here

In the SEC’s filing, many massive crypto’s such as “SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS” are directly listed as unregistered securities. The implications of this note on the broader crypto market has the potential to be huge, considering that CoinBase, often considered the most regulated crypto exchange in the United States, has nearly all of these tokens listed for sale on its platform.

The story of crypto regulations is an ever developing one, but today’s actions by the SEC do not mark an optimistic outlook in terms of the broader market.