• The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, claiming that the crypto exchange violated securities laws, manipulated markets, and illegally served US-based customers from its international platform.
• SEC chairman Gary Gensler has likened Binance’s handling of customer assets to FTX’s failed competitor, expressing concern over the crypto industry’s lack of compliance with public policy.
• Gensler urged financial advisors not to trust Binance as a custodian for their crypto assets.
Lawsuit Against Binance
The U.S. Securities and Exchange Commission (SEC) has filed a 136-page lawsuit against Binance with accusations including securities law violations, market manipulation, and illegal service to US-based clients from its international platform. SEC chairman Gary Gensler has expressed concern over the crypto industry’s lack of compliance with public policy in regards to this case.
Parallels With FTX
Gensler sees “parallels” between Binance and its failed competitor FTX’s handling of customer assets. He said financial advisors should not look to Binance as a trustworthy custodian for their crypto assets due to the company’s alleged mismanagement and “commingling” user funds in a manner that regulated companies with oversight could not do. Specifically, he pointed out sister organizations controlled by CEO Changpeng Zhao (CZ), which allegedly engaged in wash trading that artificially inflated trading volume on the platform as well as commingled billions of dollars in funds from both the international and US entities despite being supposed to operate separately.
Lack Of Compliance With Public Policy
Gensler stated that many entrepreneurs behind platforms are “trying to build wealth for themselves and their investors through sister organizations, hedge funds, trading against the customers or even… dealing against their customers.” He noted that this is unacceptable behavior given existing public policies regarding disclosures, conflicts of interest, segregating customer funds etc., adding that it is critical for companies operating within the space to comply with such regulations if they want to remain operational moving forward.
Urging Financial Advisors Not To Trust Binance As A Custodian
Considering all of these factors, Gensler urged financial advisors not to trust Binance as a custodian for their crypto assets given its current status in regard to legal proceedings involving U.S regulators such as the SEC itself – noting that “your client funds under an existing 2009 rule have to be [under] proper qualified custodians” which is something he believes cannot be guaranteed by CZ’s platform at present time .
Conclusion
Through thirteen charges, 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 – ultimately emphasizing the importance for companies within this space adhere strictly adhere to public policies regarding disclosures , conflicts of interest , segregating customer funds etc . if they want remain operational going forward .