Coinbase did not immediately respond to a request for comment. The SEC’s complaint accuses Binance of engaging in unregistered securities offerings through the sale of tokens that include SOL, ADA, and MATIC, all of which Coinbase also supports. The SEC hit Nasdaq-listed Coinbase with a notice of intent to sue in March. Other exchanges may also have cause for concern. “And in a situation like this, people get very nervous and start cooperating. But I wouldn’t be surprised to see criminal action follow,” says Stark. “These companies took the approach that it’s better to seek forgiveness than permission-and got very rich. “When you have an SEC complaint that contains allegations of scheming and fraudulent conduct, it certainly creates the opportunity for a criminal prosecutor to step in,” he says. The contents of the “scathing” civil complaint, Stark adds, set the stage for potential criminal action against those at the helm. John Stark, who served for 18 years as an attorney at the SEC, says this initial complaint, despite being lengthier and more extensive than any he composed while working at the agency, may still only be the “tip of the iceberg.” Some experts speculate that there could be consequences for Binance’s top leadership. The allegations against Binance are “very serious,” says Aaron Kaplan, a securities attorney, who adds that if proven they demonstrate a “complete lack of internal risk management and controls necessary to operate a business that handles billions of dollars of customer funds.” The likely outcome, he says, is that Binance will be pressured into ceasing operations in the US. “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms,” said Gensler. “We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC chair Gary Gensler said in a statement accompanying the charges. It’s no secret that the US Securities and Exchange Commission has been investigating Binance, the world’s largest crypto exchange-which has no head office or formal address but processes $12 billion worth of cryptocurrency transactions per day. But the charge sheet filed today by the SEC in the District of Columbia contains a list of 13 alleged violations of securities laws, some with unavoidable echoes of FTX, the crypto exchange that collapsed in spectacular fashion in November, triggering industrywide turmoil.Īmong other allegations, the SEC claims that Binance and the company’s CEO and founder, Changpeng Zhao, had the freedom to “divert customer assets as they please” to another Zhao-owned business, Sigma Chain-an entity the SEC accuses of engaging in “manipulative trading that artificially inflated the trading volume.” The SEC also alleges that Binance and Zhao concealed the commingling of billions of dollars of customer assets, which were delivered to yet another third party, Merit Peak Limited, also owned by Zhao. In the case of FTX, customer assets are alleged to have been commingled and passed to a sibling company, Alameda Research, to finance trading activity and debt repayment, among other things.
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