Markets Dip Red After SEC Sues Binance

Bitcoin and ether take a beating on Binance lawsuit news

June 5, 2023 12:30 pm

Natchapol18/Shutterstock modified by Blockworks

Crypto markets sank late Monday morning in New York on news that the largest global crypto exchange Binance is facing several charges from the SEC.

Bitcoin (BTC) and ether (ETH) lost as much as 2.5% and 2%, respectively at time of publication. Binance’s native BNB token fell as much as 7% immediately after the lawsuit announcement.

The SEC alleges Binance misused consumer funds and engaged in unauthorized security sales, according to court documents released Monday. The agency also claims BNB and Binance’s stablecoin, BUSD, which briefly depegged Monday, are securities.

Newsletter

Subscribe to The Breakdown

“Binance and BAM Trading, under [Changpeng] 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,” the court filing read.

The SEC claims that BAM Trading’s staking program is an investment contract and therefore a security, which Binance failed to register with the agency.

The charges are reminiscent of allegations Sam Bankman-Fried faces over his now-collapsed exchange, FTX. The SEC claims Bankman-Fried transferred consumer funds from the exchange to a trading entity he owned; Alameda.

The SEC uses similar language in its Binance suit, explicitly noting that consumer funds were allegedly traded with third parties.

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
0xResearch: Alpha in your inbox. Think like an analyst.

Tags

Newsletter

The Breakdown

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Digital Asset Summit 2026

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

buy tickets learn more

recent research

Research

Kinetiq Protocol: From LST Infrastructure to HIP-3 Deployer

Kinetiq has established itself as Hyperliquid's dominant liquid staking protocol, holding 82.5% of LST market share with $610M in TVL. The protocol is now expanding beyond its kHYPE staking core into higher take-rate verticals: iHYPE for institutional custody rails, Launch for HIP-3 capital formation, and Markets for builder-deployed perpetuals. We view Markets, launching Jan. 12, as the highest-potential product line given its mechanically scalable, activity-linked unit economics. Near-term revenue remains anchored by kHYPE's KIP-2 fee schedule (~$1.6M annualized), while Markets provides embedded optionality if HIP-3 economics normalize post-Growth Mode. KNTQ's setup is relatively clean: zero insider unlocks until November 2026, 6.2% buyback yield from staking revenue, and cleared airdrop overhang. Risks center on unproven Markets execution, declining kHYPE TVL despite ongoing incentives, and competition from Hyperliquid's native initiatives.

by Shaunda Devens