US accuses world’s largest cryptocurrency exchange Binance of mishandling funds

He USA The Securities and Exchange Commission has sued Binance, the world's largest cryptocurrency exchange, accusing the company of mishandling client funds.

Binance and its CEO Changpeng Zhao, commonly known by his initials 'CZ', face 13 federal charges including misleading investors, tampering with client assets, and failing to register with relevant regulatory bodies.

The SEC accused the cryptocurrency giant of creating "an extensive web of deception, conflicts of interest, failure to disclose and calculated evasion of the law," said SEC Chairman Gary Gensler.

The regulators said that Zhao and Binance “combine client assets or divert client assets as they please, including to a Zhao owned and controlled entity called Sigma Chain.”

Sigma Chain then used that money for "manipulative trading" used to artificially inflate Binance's trading volume.

In addition, the company faces charges of knowingly choosing to 'evade' US law.

"We allege that Zhao and the Binance entities not only knew the rules of the road, but also consciously chose to evade them and put their clients and investors at risk, all in an effort to maximize their own profits," SEC Enforcement Division Said director Gurbir S Grewal.

In 2019, the Commodity Futures Trading Commission (CFTC) banned Binance from operating in the US due to the company failing to properly register with the agency.

In order to comply with US law, the company established a separate and independent exchange called Binance.US.

However, the SEC has now accused Zhao of secretly manipulating and controlling Binance.US despite its alleged independence.

Earlier on Monday, Reuters reported that a single Binance executive, Guangying Chen, was the lead operator of five accounts holding US client funds on Binance.US.

As the main operator, employees of the supposedly independent Binance.US had to ask Chen for permission to process payments for those accounts.

They also say that Binance allowed continued access of certain “high-value US clients” to the original Binance exchange despite being prohibited from operating in the country.

The complaint alleges that Zhao personally directed these moves to violate US law. In one case, Binance's director of compliance sent a message to a colleague that read: "[w]We are operating like a fucking unlicensed stock exchange in the US bro,” the SEC said.

In a written statement released shortly after the SEC's announcement, Binance called the charges "disappointing" and "disheartening." The exchange said that they were working with the regulatory body to address their concerns before the charges were filed.

"While we take the SEC's allegations seriously, they should not be the subject of SEC enforcement action, let alone in an emergency," Binance said. 'We intend to defend our platform vigorously.'

The company also said that all US customer funds held by Binance.US are "safe."

"Any accusation that user assets on the Binance.US platform have ever been at risk is simply incorrect," the company said.

The lawsuit comes months after Binance's former main competitor FTX collapsed in part due to similar issues. allegations of mishandling client funds.

The company is now bankrupt, and its disgraced CEO, Sam Bankman-Fried, is now facing criminal charges for securities fraud and wire fraud.

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