SEC sues Binance and CEO CZ for securities violations.

The U.S. Securities and Exchange Commission (SEC) has launched a lawsuit against crypto trading platform Binance, its U.S. subsidiary Binance US, and CEO Changpeng "CZ" Zhao, alleging violations of federal securities regulations. The SEC claims that Binance and CZ provided unregistered securities through the BNB token and the Binance-linked BUSD stablecoin, asserting that Binance's staking service contravened securities legislation. Accusations also state that Binance US and its operator, BAM Trading, didn't register as a clearing agency, broker, or exchange. Additionally, the lawsuit argues that CZ covertly controlled Binance US, inflated trading volumes, and that Binance let U.S. citizens trade on its platform despite public denials.

The lawsuit also reveals CZ's total ownership of CPZ Holdings Limited, which owns BAM Management Company Limited, the major shareholder of BAM Management US Holdings Inc., the parent company of BAM Trading Services running Binance US. Internal tensions between U.S. CEOs and top Binance executives regarding control of U.S. operations are highlighted, with ex-U.S. CEO Brian Brooks departing after a short three-month tenure due to these issues. The suit raises worries about two entities, Merit Peak and Sigma Chain, operating on the Binance US platform. It also details attempts by Catherine Coley, the inaugural CEO of U.S. operations, to seek more autonomy amid team frustrations. The lawsuit mentions the 'Tai Chi' documents, implying Binance planned to dodge U.S. regulations while keeping a U.S. presence through an associate.

The SEC's lawsuit underlines that Binance US operated an OTC desk interacting exclusively with Alameda Research, the defunct company founded by FTX creator Sam Bankman-Fried. Responding to the lawsuit, Binance US labels it as "regulation by enforcement" and "baseless," asserting the safety of user assets on their platform and promising to vehemently defend against contrary allegations. SEC Chair Gary Gensler accuses Binance and CZ of an "extensive web of deception." This SEC lawsuit supplements allegations by the U.S. Commodity Futures Trading Commission (CFTC) earlier this year, asserting that Binance and CZ supplied unregistered crypto derivatives products in the U.S., breaking federal law. The SEC aims to prevent Binance, Binance US, and CZ from further federal law violations, recover any unjust gains, and impose civil penalties. The regulator also aims to prohibit CZ from holding any director or officer position in any securities issuer and ban Binance, Binance US, and CZ from participating in or trading any securities, including crypto asset securities.