A federal lawsuit against the world’s largest crypto exchange is set to create a public spectacle but could indirectly benefit crypto.
- The Securities and Exchange Commission (SEC) announced on Monday, June 5, that 13 charges have been filed against crypto exchange Binance and its founder Changpeng Zhao for securities violations.
- The press release alleges Zhao is guilty of 13 counts of unregistered securities trading and operating unregistered exchanges, dealers, and brokers while misrepresenting Binance’s level of oversight and trade controls.
- The SEC is accusing Binance of misleading investors regarding the company’s ability to find market manipulating, misusing company funds, and permitting illegal trading within the U.S.
- Binance dismissed the charges as “baseless” and says, “we intend to defend ourselves vigorously.”
- The price of Bitcoin took a 5.5% dive following the announcement Monday, dropping beneath a $26,000 valuation. Ether took a similarly precipitous drop of 5.1%.
Why It’s Important
The SEC’s lawsuit represents one of the largest attempts from federal regulators to crack down on the crypto industry yet. The federal government is already underway on the well-publicized charges against FTX founder Sam Bankman-Fried. Still, various government agencies have publicly expressed a desire to reign in the crypto industry, which is viewed as an uncontrolled cesspool of fraud and illegal activity.
Binance is the largest crypto exchange in the world, and its targeting reflects one of the largest legal attacks on the industry yet.
“Simply put, today’s filing is unjustified by the facts, by the law, or by the Commission’s own precedent. The relief sought by the Commission would harm the very investors the SEC is charged with protecting. It would also stifle innovation and punish our company and industry rather than working to allow American businesses to thrive,” argues Binance.
The lawsuit could still represent a net victory for the validity and recognition of cryptocurrency. The U.S. government has an active incentive to tackle the worst actors in crypto and publicly take them down. Publicly tackling alleged corruption at Binance could still allow space for the federal government to release a regulatory framework for crypto finally. While the crypto industry is begging the SEC for clearly operational guidelines to protect legitimate members of the industry, this move could at least offer crypto companies a detente against a hostile government, Axios notes.