The cryptocurrency market saw a sharp selloff on Monday after news broke that the United States Securities and Exchange Commission (US SEC) sued the world's largest cryptocurrency exchange, Binance. , and its founder and chief executive officer (CEO), Changpeng Zhao (CZ). The complaint accuses Binance of secretly controlling client assets, allowing them to siphon client funds at their whim.
In the past 24 hours, the global crypto market capitalization has fallen more than 4.5 percent, according to CoinMarketCap. Bitcoin, the largest crypto token by market capitalization, is down nearly 5 percent and was trading at $25,720. This is the lowest level it has touched since March 17.
Ethereum, Cardano, Solana, Dogecoin, and Polygon, among other tokens, were also trading in the red.
Additionally, Binance Coin (BNB), a token used to pay transaction and trading fees on Binance, fell nearly 9 percent in the past 24 hours.
โBitcoin is still holding at the very important psychological level of below $25,700, while it is likely to rally from here, breaking the same may take it to $20,000 levels. The SEC lawsuit has explicitly named several popular coins as SOL, ADA, MATIC as stocks that cause their price to drop significantly as well," said Shubham Hudda, a senior manager at CoinSwitch Markets Desk.
In its 136-page complaint, the SEC said Binance created separate US entities "as part of an elaborate scheme to evade US federal securities laws." For three years, until June 2022, Sigma Chain, a trading company owned by CZ, was engaged in artificially inflating the trading volume of crypto asset securities on the Binance.US platform, it added.
โWe will continue to cooperate with regulators and lawmakers in the US and around the world because that is the right thing to do,โ Binance said in a blog post on Monday. However, she added that Binance is not a US exchange, so the SEC's actions are "limited in scope."
Binance was founded in Shanghai in 2017 by CZ, a Canadian citizen born and raised up to the age of 12 in China. While its holding company is based in the Cayman Islands, Binance says it does not have a headquarters and has declined to state the location of its main exchange Binance.com.
In its lawsuit, the SEC also alleged that Binance and Zhao had โfree reignโ over billions of dollars worth of US crypto assets.
The SEC's allegations are the latest in a series of legal troubles for Binance. In March, another US regulator, the Commodity Futures Trading Commission, filed its own lawsuit against Binance, accusing it of operating illegally in the country. The exchange is also being investigated by the US Department of Justice.
Regulatory agencies globally have stepped up their scrutiny of cryptocurrency companies since the dramatic collapse of cryptocurrency exchange FTX last year.
โThe market will respond sharply as the Binance-SEC saga unfolds, we should prepare for a choppy market in the coming weeks,โ Shivam Thakral, chief executive officer of Indian crypto exchange BuyUcoin, told Business Standard. He added that this also highlights the need for regulatory clarity in the global crypto ecosystem.
