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SEC Sues Binance For Operating an Illegal Crypto Exchange

SEC Sues Binance For Operating an Illegal Crypto Exchange

As part of an ongoing commitment to crack down on crypto platform crimes, the Securities and Exchange Commission (SEC) has sued Binance for operating an illegal cryptocurrency exchange in the United States. 

According to Forbes, the lawsuit, filed today, alleges that Binance founder, Changpeng Zhao, misused some customer’s funds by diverting them to Sigma Chain, a trading entity controlled by Zhao. The SEC filing says that Sigma Chain then allegedly engaged in “manipulative trading," artificially and fraudulently boosting Binance’s trading volume.

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Feature Image Credit: Andriy Onufriyenko/Getty Images

Zhao and his spokespeople have issued an official statement on their blog, saying in part:

“ We are disappointed that the U.S. Securities and Exchange Commission chose to file a complain today against Binance seeking, among other remedies, purported emergency relief. From the start, we have actively cooperated with the SEC's investigations and hae worked hard to answer thei questions and address their concerns. Most recenlty, we have engaged in extensive good-faith discussions to reach a negotiated settlment 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. While we take the SEC's allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. ”

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The CEO also took to Twitter to post a string of messages, including one that notes:

"Our team is all standing by, ensuring systems are stable, including withdrawals, and deposit

This is not the first time Binance has faced trouble recently. In December, major accounting firm, Mazars Group, cut ties with the crypto giant

At the time, CNBC shared details about the developing situation, indicating that Mazars Group's decision to suspend work came on the heels of the global accounting firm releasing “proof of reserve” reports for several digital asset exchanges.

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Credit: d3sign/Getty Images

Per CoinDesk, a now-broken link on the Mazars website indicated that Binance's bitcoin reserves were overcollateralized, an occurrence that might now be explained by the Sigma Chain situation.

This is a developing story.

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