Binance Pushes Back on SEC Lawsuit, Denies Commingling User Assets
Binance claims that it tried to reach a settlement with the SEC ahead of the lawsuit
Artwork by Axel Rangel
Binance claims that it is “disappointed” with the SEC’s allegations that the exchange mishandled funds, operated as an unregistered exchange and sold unregistered securities.
The SEC’s recent lawsuit names Binance, CEO Changpeng Zhao, Binance.US and BAM Trading as defendants.
“Most recently, we have engaged in extensive good-faith discussions to reach a negotiated settlement to resolve their investigations. But despite our efforts, with its complaint today the SEC abandoned that process and instead chose to act unilaterally and litigate. We are disheartened by that choice,” Binance said in its statement.
In a separate tweet, Binance.US said, “Simply put, today’s filing is unjustified by the facts, by the law, or by the Commission’s own precedent.”
Binance alluded to Coinbase’s ongoing legal battle with the SEC, saying that the lawsuit is another example of the Commission regulating “with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology. Unilaterally labeling certain tokens and services as securities – even ones over which other U.S. authorities have asserted jurisdiction – only compounds these problems.”
Coinbase and the SEC are currently locked in a legal battle over defining crypto regulation.
The exchange directly opposed the SEC’s allegations that Binance.US commingled user funds, and said that user assets are “safe and secure.”
“Through accounts owned and controlled by Zhao and Binance, billions of U.S. dollars of customer funds from both Binance Platforms were commingled in an account held by a Zhaocontrolled entity (called Merit Peak Limited), which funds were subsequently transferred to a third party apparently in connection with the purchase and sale of crypto assets,” the SEC’s lawsuit claimed.
The lawsuit also alleges that “Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.”
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