- New trouble brews up for Binance as SEC thinks Binance could have violated securities law in BNB ICO token sale.
- Binance could soon meet a similar fate as Ripple leading to the months-long investigation.
The world’s largest cryptocurrency exchange Binance has been going through a rough phase! As per the latest Bloomberg report on June 7, the U.S. Securities and Exchange Commission (SEC) has initiated an investigation into the 2017 token sale of the BNB tokens.
Five years down the line, the SEC has accused Binance of selling BNB tokens as unregistered securities. This is yet another major crypto crackdown by the U.S. SEC after the 2020 crackdown on Ripple’s XRP. The latest news also comes just after a report emerged that Binance allegedly facilitated the movement of $2.35 billion worth of illicit crypto funds over the last four years.
Following the news, the world’s fifth-largest cryptocurrency tanked 8 percent and is currently trading at $282 with a market cap of $46 billion. Sources familiar with the matter further said that the U.S. SEC is investigating whether the 2017 BNB token ICO amounted to the sale of a security.
This could mean further trouble for the crypto exchange which is already dealing with multiple regulatory issues. Binance U.S, the American entity of the global crypto exchange has been facing investigations from different regulators. This includes the IRS, the CFTC, and the U.S. Justice Department. The U.S. SEC has declined to comment on this matter. However, in a message to Bloomberg, Binance said:
“It would not be appropriate for us to comment on our ongoing conversations with regulators, which include education, assistance, and voluntary responses to information requests.” The company added that it works with authorities and “we will continue to meet all requirements set by regulators.”
Binance U.S. and its regulatory problems
Binance is one of the most popular crypto exchanges worldwide contributing to over 50 percent of the global crypto trading. However, it has a separate entity operating in the U.S. dubbed Binance U.S. The goal of this separate entity is to function under the regulatory rules specific to America.
But despite this, Binance had a tough time dealing with U.S. regulators. The leading crypto exchange sold its BNB tokens through an initial coin offering (ICO) back in 2017. In the whitepaper, Binance said that it would be using 85 percent of funds from the ICO sale to build Binance’s global exchange.
The exchange also enticed investors/traders to use BNB and pay a low fee. This also included at least one U.S. investor, a detail that the SEC would like to use in its defense.
Sources familiar with the matter said that an investigation doesn’t mean that the SEC will be suing the company. But the probe could lead to a months-long investigation just as we saw in the case of Ripple. The SEC is also looking into market-making companies tied to the exchange’s CEO Changpeng Zhao. The securities regulator wants to check Zhao’s ownership stakes of market makers on Binance U.S. It will also look into whether the exchange has conducted necessary broker-dealer activities.