Binance, the world’s largest cryptocurrency exchange, is facing legal risks such as accusations of money laundering and illegal securities offerings, as the Securities and Exchange Commission (SEC) is focusing its attention on every exchange operating in the United States.
The news was first reported by Forbes on Thursday, with the original source coming from Senator Lummis’ staff.
Since the Ripple case became public, all Coinbase and Binance activity has been conducted with caution and in compliance with regulations. Binance launched Binance.US with limited offerings for customers in the United States.
Ex Post Facto Much?
Nobody wants to become the “Second Ripple.” The SEC-Ripple legal battle began in December 2020 and shows no signs of ending before late 2022.
Unlike the Commodity Futures Trading Commission (CFTC), the SEC has a negative attitude toward cryptocurrencies. The SEC suspected the NFT of violating global stock market terms in early March.
In the first crypto-related insider trading case, the SEC charged the former Coinbase executive and two others with wire fraud in July. The SEC’s approach to the industry is far from centered on developing transparent regulatory rules.
All SEC allegations are most likely related to securities, despite the fact that Bitcoin and Ethereum have not been designated as security assets. In that sense, the SEC is over-regulatory.
In a statement, Republican Senator Tom Emmer said the agency and its chair were “hellbent on expanding the size of its crypto enforcement division using enforcement to unconstitutionally expand its jurisdiction.”
Regulate First, Then Enforce
The SEC has triggered a tidal wave in the cryptocurrency community, and if things go too far, legislators may hand over control of cryptocurrency regulation to the CFTC. Previously, a bill was proposed to expand CFTC oversight of cryptocurrency markets.
Senators Cynthia M. Lummis and Kirsten Gillibrand supported the proposal. The official, however, stated that the new bill is unlikely to be passed by Congress this year.
Faced with the SEC’s allegations, Coinbase is willing to cooperate in any legal challenges.
Apart from the SEC’s move, there is also a gap in the US with no specific regulation for cryptocurrencies and no clear demarcation of securities assets. Coinbase has a rigorous process of reviewing and analyzing tokens before listing them on the exchange, which has been reviewed by the SEC.
The SEC filed a civil complaint earlier this month against 11 people involved in a Ponzi scheme that defrauded more than $300 million.
According to the filing on August 1, the SEC alleges that the Forsage platform’s founders and promoters used a “fraud pyramid and multi-level Ponzi scheme” to raise funds from millions of retail investors worldwide.
Two of the defendants did not admit or deny the charges but instead agreed to a settlement contingent on the court’s decision. Forsage refused to provide a contact method for the company and was not immediately available for further comment.
With Binance, the investigation has been ongoing since last month. The US regulators have been looking into whether Binance Holdings Ltd, the world’s largest cryptocurrency exchange by trading volume, violated securities laws during an initial coin offering (ICO) in 2017.
Where Was The SEC With Anything – Ever
The SEC investigation focuses on the company’s origins as well as the origins of the BNB token, which is currently the world’s fifth largest cryptocurrency.
Authorities are investigating whether Binance’s 2017 BNB token issuance amounted to the sale of a security that should have been registered with the regulator.
In addition to BNB, the SEC is looking into possible trading abuses by Binance employees and whether the US branch of Binance.US, which opened in 2019, is adequately supported by a global partner.
Binance has stated that Binance.com and Binance.US are distinct entities. Binance.US is a separate US-focused trading platform that provides products and services to US users, and of course, follows federal and state regulations.