U.S. SEC Files 13 Charges Against Binance and Changpeng Zhao for ‘Web of Deception’

U.S. SEC Files 13 Charges Against Binance and Changpeng Zhao for ‘Web of Deception’

by June 6, 2023

The U.S. Securities and Exchange Commission has charged crypto exchange Binance and its founder Changpeng Zhao with a variety of securities law violations.

The regulator alleged that while Zhao and Binance publicly claimed that U.S. customers were restricted from transacting on its platform, they had in reality subverted their own controls to secretly allow high-value U.S. customers to do so.

The SEC added that while Zhao and Binance publicly claimed that Binance.US was created as a separate, independent trading platform for U.S. investors, they had secretly controlled the platform’s operations behind the scenes.

One of the more concerning charges levied against the crypto exchange is the allegation that Zhao and Binance exercise control of the platforms’ customers’ assets.

This had allegedly permitted them to commingle customer assets or divert customer assets as they please, including to an entity Zhao owned and controlled called Sigma Chain.

The SEC’s complaint further alleges that BAM Trading and BAM Management US Holdings misled investors about non-existent trading controls over the Binance.US platform, while Sigma Chain engaged in manipulative trading that artificially inflated the platform’s trading volume.

Further, the complaint alleges that the defendants concealed the fact that it was commingling billions of dollars of investor assets and sending them to a third party, Merit Peak Limited, that is also owned by Zhao.

Gary Gensler

Gary Gensler

“Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied.


They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value U.S. customers on their platforms. The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”

said SEC Chair Gary Gensler.

Binance refuted these charges saying it was “disappointed” that the SEC had chosen to file the complaint and claimed to have actively cooperated with the SEC’s investigations and have “worked hard to answer their questions and address their concerns”.

The crypto exchange said that it intends to defend its platform vigorously, labelling the SEC’s actions as misguided and a conscious refusal to provide much-needed clarity and guidance to the digital asset industry.

Binance’s statement read,

“Any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong, and there is zero justification for the Staff’s action in light of the ample time the Staff has had to conduct their investigation.


All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure, and we will vigorously defend against any allegations to the contrary. Rather, the SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators – and investors do not appear to be the SEC’s priority. Because of our size and global name recognition, Binance is an easy target now caught in the middle of a U.S. regulatory tug-of-war.”

The statement also blasted the SEC for the so-called misguided lawsuits and claimed that the regulator’s real intent appears to be to make headlines.

In the midst of the repeated blows to Binance, there are rumours that Richard Teng may emerge as Zhao’s successor to appease the U.S. regulators.

The crypto industry that was just beginning to show signs of recovery from the FTX contagion saw Bitcoin falling to its lowest level since March since the news broke out.