The announcement of the United States Securities and Exchange Commission’s lawsuit against Binance, Binance.US and Binance CEO Changpeng Zhao (CZ) may have surprised the cryptocurrency community, but the SEC’s focus on the exchange was well known. The content of the lawsuit was received with various reactions.
Zhao he claimed in a tweet on the morning of June 5 that “the media gets the information before we do,” and the company had not seen the SEC’s lawsuit then. The two statements issued by Binance in response to the lawsuit are proof of the confusion behind the scenes.
The exchange called the lawsuit “disappointing” in a blog post and made emphasis on the lack of clarity and guidance from the SEC, as well as its impact on financial innovation. A subsequent e-mailed statement further addressed the legal issues, claiming that due process had not been respected and promising a vigorous defense.
No one paying attention should have been caught off guard by the SEC complaint, Cory Klippsten, CEO of financial firm Swan Bitcoin, said of the allegations. He claimed in a statement to Cointelegraph:
“These Binance practices have essentially been open secrets, so no one operating in the space will be surprised by any of the allegations.”
Some of the details will still raise eyebrows. The most citable passage in the lawsuit arguably comes from the anonymous head of Binance’s compliance office in 2018, who said in a message to another company official:
“We’re operating like a fucking unlicensed stock exchange in the US bro.”
More light was shed on Brian Books’ brief tenure as CEO of Binance.US. Brooks, former Comptroller of the US Currency and CEO of Binance.US for three months in 2021, is also memorably cited in the lawsuit (as “CEO B” of BAM Trading). According to the SEC, Brooks said in testimony:
“What became clear to me at a certain point was that Zhao was the CEO of BAM Trading, not me. […] I realized, uh, I’m not really the one running this company, and the mission that I think I signed on to is not the mission. And as soon as I realized it, I left.”
The SEC has repeatedly stated that almost all cryptocurrencies are securities, so the list of 10 tokens may also be enlightening. There are known claims, such as that Filecoin (FIL) is a value. Algorand (SOMETHING) has also been noted above.
Among the tokens listed as securities in the lawsuit, for Solana (SUN), Cardano (ADA) and Polygon (MATIC), Binance’s lawsuit may be a warning, however.
And guess which tokens are illegal securities offerings. Spoiler alert it includes Solana and Cardano. pic.twitter.com/wMdICfIE3j
— Stephen Diehl (@smdiehl) June 5, 2023
There were already indications that a shakeup was underway at the exchange. Almost simultaneously with the news of the SEC complaint, Bloomberg reported that Richard Teng could be the favorite to replace Zhao as the exchange’s next CEO. The news service was citing “individuals with direct knowledge.”
have was appointed director from all regional markets outside of the United States on May 29. He joined Binance Singapore in August 2021 from the Financial Services Regulatory Authority at Abu Dhabi Global Market, where he was CEO, and “quickly rose through the ranks.”
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