The U.S. Securities and Exchange Commission (SEC) recently filed a lawsuit against Binance. US, the American arm of the global crypto exchange Binance, alleging that it had inflated trading volumes through the illegal practice of wash trading. The allegations, if proven, would be a significant blow to the legitimacy of the platform.
The SEC lawsuit and subsequent investigation by the Justice Department have reportedly led to several senior officials’ resignations and a significant drop in the platform’s market share, according to The Wall Street Journal.
Following the lawsuit, Binance. US has reportedly laid off a portion of its staff, about 50 positions.
Court documents reveal that the SEC has been investigating Binance. US since 2020, discovering evidence of hundreds of millions of dollars in profits from the exchange. Binance. US CEO Changpeng Zhao was among those named in the lawsuit.
In response to the lawsuit, Binance. US released a statement denying the allegations, saying, “We categorically deny any allegations of wash trading or misconduct of any kind at Binance. US.” However, despite the denial, the platform’s market share has dropped to less than 1% compared to a year ago.
Despite the regulatory challenges that Binance. US has been facing, the parent exchange, Binance, still has a major portion of the global market share at 52%. The percentage is down from a high of 60% at the start of the year.
It remains to be seen how the U.S. government’s actions will impact the crypto exchange and its customers. In the meantime, customers of Binance. US are being asked to withdraw their funds in order to comply with the SEC’s legal proceedings.
The SEC’s case against Binance. US could have major implications in the world of digital assets and serves as a reminder of the importance for all crypto exchanges to comply with regulations in order to stay legitimate.