Cryptocurrency prices fell Monday (June 5) following news of regulatory action against Binance.
The Securities and Exchange Commission filed 13 charges against the crypto exchange and its founder Changpeng Zhao., alleging it committed a variety of securities law violations.
“Through 13 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,” SEC Chair Gary Gensler said in a news release.
A report by Bloomberg News notes that the SEC’s allegation that some tokens that traded on Binance.com and Binance.US were offered and sold as securities could have wide implications for other exchanges where these tokens trade.
The report said Bitcoin and Binance’s own Binance Coin both dropped in price Monday. Bitcoin accounts for nearly half of the value of the $1.2 trillion crypto market, while Binance Coin is the fourth-largest token. Binance handles around 50% of all crypto trading volume, Bloomberg said.
As of 4:30 p.m. ET, Bitcoin was trading at $25,628, down from a high of $27,093 in the morning.
The SEC’s suit is part of a string of actions against Binance and Zhao, including a suit from March by the Commodity Futures Trading Commission and reports of an ongoing probe by the U.S. Department of Justice.
It’s also happening at a time when regulatory pressure on the crypto industry has left many companies in the sector looking to move their operations overseas.
“This is more a confirmation of what people are already expecting and will just continue the push of putting everything offshore and leaving the U.S. behind,” Austin Campbell, adjunct professor at Columbia Business School, told Bloomberg.
Binance said in a Monday blog post that it was “disappointed” with the SEC’s move, arguing that the company cooperated with the regulator’s investigations, worked to address its concerns and had hoped to reach a negotiated settlement.
“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,” the company said in the post. “We intend to defend our platform vigorously.”
Among the SEC’s allegations are that Zhao and Binance permitted American customers to trade on the Binance.com platform while saying publicly that they restrict U.S. customers, that Zhao and Binance control the Binance.US platform while publicly stating that the platform is independent and that Zhao and Binance control the assets of both platforms’ customers and commingle or divert those assets.
Similar allegations were the subject of a Reuters report Monday which claimed that a Binance executive controlled a number of Binance.US accounts.