The United States Securities and Exchange Commission (SEC) has filed charges against Binance, its United States-based exchange company and its CEO, Changpeng “CZ” Zhao, for violating securities legislation.
On June 5, The SEC filed 13 counts against Binance in the US District Court for the District of Columbia on allegations that the company misled investors and misused client funds. The allegations of mismanagement of client funds and violation of US banking regulations were first raised in a report published by Reuters in the last week of May. At the time, Binance had refuted all the allegations, calling the report a list of conspiracy theories.
According to the regulator, Binance has been mixing up “billions of dollars” in user assets and covertly moving them to another company under CZ control. The allegations included misleading investors by misrepresenting the effectiveness of the company’s mechanisms to identify and prevent manipulative trades.
The regulators further alleged that Binance had not done enough to prevent US investors from using its exchange without a license. Some of the main allegations in the lawsuit are:
- Zhao and Binance secretly controlled the operations of the Binance.US platform.
- Zhao and Binance exercise control of the platforms’ client assets, allowing them to mix client assets.
- BAM Trading (the entity that controlled Binance.US) misled investors about the lack of trading controls over the Binance.US platform.
- Binance and BAM Trading operated on unregistered national stock exchanges, broker-dealers, and clearing agencies.
- Binance and BAM Trading participated in the sale of securities, including Binance’s own crypto assets; the exchange token, BNB (BNB); a stablecoin, Binance USD (BUSD); certain cryptocurrency loan products; and a staking-as-a-service program.
The SEC’s list of 13 charges against the cryptocurrency exchange comes just months after another lawsuit filed by the US Commodity Futures Trading Commission (CFTC) in March, which invoked mixed reactions from the cryptocurrency exchange. cryptocurrency community, most prominently split over Binance’s approach—dubbed “Tai Chi”—and US regulators’ alleged “Operation Chokepoint 2.0.”
The reference “Tai Chi” comes from a report from Forbes in 2020 alleging that Binance had taken a series of steps to evade regulators in the US, citing a document that labeled it the “Tai Chi entity.” Tai Chi is a Chinese term used to describe a method of avoiding responsibility. At the time, Binance threatened to sue Forbes over the claims.
1/ If you are ever contacted by an individual named “Michael Del Ray” @DelRayMan desde @ForbesCrypto @Forbes do yourself in favor and block this individual immediately.
I will show in this thread how this individual plagiarized me for a huge @binance expose ; @PENamerica pic.twitter.com/PmuczsAq43
—James Edwards (@librehash) February 12, 2021
1/ If you are ever contacted by an individual named “Michael Del Ray” @DelRayMan from @ForbesCrypto @Forbes , please do yourself a favor and block this individual immediately.
I’m going to show in this thread how this individual plagiarized me for a huge @binance exposure
Operation Chokepoint 2.0 is the term used by Coin Metrics co-founder Nic Carter to refer to an alleged effort by US lawmakers and regulators to stifle the growth of the cryptocurrency industry.
Both theories resurfaced on June 5 following the SEC lawsuit, with Cardano founder Charles Hokinson fueling the Operation Chokepoint 2.0 theory.. Hoskinson said the SEC’s next step is to “implement ‘chokepoint 2.0’ in the United States.” The ultimate goal is a CBDC [moneda digital del banco central] based on an agenda associated with a handful of massive banks and end-to-end control over every aspect of your financial life.”
With respect to Binance, I’m reading through the SEC complaint. It’s over 130 pages, but seems like the next in a series of steps to implement chokepoint 2.0 in the United States. The end goal is an agenda based CBDC partnered with a handful of massive banks and end-to-end control…
—Charles Hoskinson (@IOHK_Charles) June 5, 2023
Regarding Binance, I am reading the SEC complaint. It’s over 130 pages, but it looks like the next in a series of steps to implement chokepoint 2.0 in the US. The ultimate goal is an agenda-driven CBDC associated with a handful of massive banks and end-to-end control…
Some Crypto Twitter members who have been voicing their concerns about Binance’s regulatory issues they affirmed that the Operation Chokepoint 2.0 theory is nothing more than a conspiracy, as the exchange was clearly selling securities.
Tai Chi was mentioned in the SEC’s own lawsuit, prompting some members of Crypto Twitter to recall the 2020 report.
12.Tai Chi!
Binance had a plan called “the Tai Chi Plan” meant to “reveal, retard, and resolve built-up enforcement tensions” in the US.
As it became clear its US business was violating laws, CZ wanted to help route VIP US investors offshore to create plausible deniability. pic.twitter.com/Q2vyfHxqWv
— Compound248 (@compound248) June 5, 2023
12.Tai Chi
Binance had a plan called “the Tai Chi Plan” intended to “reveal, delay, and resolve pent-up tensions” in the US.
As it became apparent that his US business was breaking the law, CZ wanted to help direct US VIP investors to tax havens to create plausible deniability.
Many members of the crypto community they believed that the lawsuit against Binance was unusual, given that the regulator rarely appoints executives. Therefore, Binance could be looking for a massive deal at best.
“I’ve never seen the SEC attempt to try a case in the court of public opinion. Usually they wait until after a case is settled to brag.” – A former SEC official who wished to remain anonymous.
Do you think the @SECGov Is the case sensationalizing before it goes to court? https://t.co/SpCM1IoBng
— Eleanor Terrett (@EleanorTerrett) June 5, 2023
“I’ve never seen the SEC try to take a case to the court of public opinion. They usually wait until a case is settled to show off.” – A former SEC official who wished to remain anonymous.
Do you think @SECGov is sensationalizing the case before it goes to court?
Others rushed to remind you to the public that the charges are against the US affiliate of Binance, which handles a small portion of the exchange’s global trading volumes.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.
