This month of June 2023 will undoubtedly go down in history as one of the most horrible for the cryptocurrency industry.
In quick succession, the US Securities and Exchange Commission launched legal proceedings in the space of 24 hours against two of the most important platforms in the sector.
The powerful regulator on June 5 filed a complaint against Binance, the largest cryptocurrency exchange in the world. The next day, the SEC sued Coinbase, the most popular platform for buying and selling digital currencies.
If the time and the simultaneity of the two complaints gives the impression that they are the same offensive by the regulator to bring the young financial services industry powered by the blockchain to heel, the two cases are quite distinct.
One is more serious (Binance) than the other as it involves criminal charges. Here are the main lines and the differences between what Binance and Coinbase are accused of and what the two firms risk.
The allegations: The platform engages in a “web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” the SEC alleges.
It accuses the firm of mishandling client funds and lying to regulators, in an effort to circumvent US laws, putting client funds at risk.
Wall Street top regulator also alleges that Binance mixed the funds of its customers with its own and secretly sent them to an entity separate from the company controlled by its founder, Changpeng Zhao. The entity in question, which is called Merit Peak Ltd., allegedly received more than $20 billion, including customer funds.
Zhao and Binance “commingle customer assets or divert customer assets as they please,” the SEC says.
Basically, Binance and its CEO and co-founder allegedly committed fraud.
The Response: Binance says the complaint is a ploy by the SEC to generate buzz and publicity. The platform says the SEC broke off negotiations that could have led to a deal.
“We intend to defend our platform vigorously,” the company assured.
It’s important to observe that Binance is not licensed in the U.S. The platform, however, has a subsidiary, Binance.US, which caters to investors living on American soil.