The U.S. Securities and Exchange Commission (SEC) has filed 13 charges against Binance, the world’s largest cryptocurrency exchange, and its Canadian founder Changpeng Zhao.
The American regulator claims that Binance and its CEO Zhao conspired to take billions of dollars worth of user funds and funnel them to a European company controlled by Zhao.
The SEC alleged in its charges that Zhao worked to subvert Binance’s controls and allow high net worth U.S. investors trade on Binance’s unregulated international exchange.
The complaint further alleges that Binance.US was created as a shield or front for the main company so that it could evade U.S. law enforcement and securities regulations.
Binance earned $11.6 billion U.S. in revenue, most of which came from transaction fees, between June 2018 and July 2021, according to the SEC.
Changpeng Zhao, also known as “CZ,” is a 46-year-old Canadian citizen. He grew up in Vancouver and received a computer science degree from McGill University in Montreal.
The SEC alleges Zhao ordered evasion plans for high-net-worth customers, using a VPN service to hide their U.S. location and submitting compliance documents to obscure their country of origin.
The SEC also alleges that Binance and Zhao used market-making companies that they controlled to inflate trading prices and profit off their customers’ funds.
The crypto exchange is also accused of mixing customer funds with Binance’s own money, similar to the allegations against bankrupt crypto exchange FTX, which collapsed last fall.
Lastly, the SEC accuses Binance of engaging in “wash trading,” where it traded with itself to artificially prop up the price of cryptocurrency assets.
Zhao dismissed the charges on Twitter, saying “4,” a popular refrain in Binance’s community urging users to ignore fear, uncertainty, and doubt.
The SEC charges come after the Commodity Futures Trading Commission (CFTC) filed similar allegations against Binance and Zhao earlier this year.
Binance is a privately held company whose stock is not traded on a public exchange. However, cryptocurrency prices slumped on news of the SEC lawsuit.
