SEC still probing Binance US over FTX-like fraud

The US Securities and Exchange Commission (SEC) is still investigating Binance US in search of evidence that the exchange and former CEO, Changpeng “CZ” Zhao, had a backdoor to control customer assets.

The SEC filed 13 charges against Binance, Binance US, and Zhao in June. At the time, the securities regulator claimed the accused operated an unregistered exchange and misrepresented trading controls and oversight on Binance US.

The regulator is concerned about Binance US misappropriating customer assets in the same manner as the now-bankrupt FTX, according to the Wall Street Journal.

Binance tussle with the SEC

The SEC believes Binance US operated in a similar model as FTX. One of the allegations is that the exchange used customer assets without consent.

On November 27, the attorneys representing Binance US argued that the SEC had zero evidence showing Binance US assets were misused. The attorneys urged US magistrate Judge Zia Faruqui to halt the SEC’s investigations over potential fraud.

Matthew Laroche, an attorney for Binance US, pointed to the ballooning costs of this lawsuit. Laroche noted that Binance US assets have dropped by nearly 90%. According to the attorney, the exchange’s user base has dropped by nearly half since the SEC filed the lawsuit.

The SEC has shifted much attention towards cryptocurrency exchanges since FTX’s collapse. The exchange investigates Coinbase and Kraken over unregistered offerings and improperly mixing customer assets.

We charged Payward Inc. and Payward Ventures Inc., together known as Kraken, with operating Kraken’s crypto trading platform as an unregistered securities exchange, broker, dealer, and clearing agency.

— U.S. Securities and Exchange Commission (@SECGov) November 21, 2023

Binance founder ordered to remain in US amid probe

The former CEO of Binance, Zhao, has been ordered to remain in the US by US District Judge Richard Jones in Seattle. This development follows Zhao taking a guilty plea to violating US anti-money laundering laws.

Zhao will have to remain in the US until the Seattle court considers whether he will remain in the country during his sentence hearing in February. Zhao had requested to return to the United Arab Emirates, where he was granted citizenship.

Breaking News: Judge Orders That The Condition Permitting CZ To Return To The UAE Pending Sentencing Is STAYED (i.e. CZ Must Remain in the Continental U.S. For Now)

(See Updated Compendium Below With Links To All Relevant DOJ/Binance/CZ Court Filings)

Yesterday, I predicted… pic.twitter.com/I6MmHkINv2

— John Reed Stark (@JohnReedStark) November 27, 2023

Zhao stepped down as the CEO of Binance last week. According to Judge Jones, the US government appealed a decision allowing Zhao to return to the UAE before his sentence hearing on February 23. Zhao agreed to pay a $175 million bond as part of the bail agreement.

As part of the settlement deal with the US government, Binance agreed to pay more than $4.3 billion. The exchange also pleaded guilty to violating anti-money laundering and sanctions guidelines.

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