Tough times for Binance with SEC investigation and Reuters leak

The SEC reportedly suspects the world’s largest cryptocurrency exchange of selling unlicensed securities in its ICO, and the news agency recounted some old cases.

The US Securities and Exchange Commission (SEC) is investigating whether Binance Holdings violated securities rules when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported on 6 June.

 

BNB’s ICO took place in July 2017 on several platforms, during the height of the so-called ICO boom, and the Binance exchange opened just days later. According to Bloomberg, citing unidentified people familiar with the matter, at least one US resident claimed to have participated in the ICO, which could be a crucial fact for an SEC case, should the agency decide to pursue one. The SEC has asserted that most cryptocurrencies are securities and has brought cases against several ICO projects.

 

Binance founder and CEO Changpeng Zhao, often known as CZ, said in a 2020 blog post that the wording of the BNB white paper was changed in January 2019 because “the potential to be misinterpreted as a security is higher in certain regions”. Binance’s US arm, Binance.US, was created later that year.

 

On the same 6 May, Reuters published a lengthy special report alleging that Binance processed at least USD 2.35 billion in transactions from hacks, investment fraud and narcotics sales between 2017 and 2021, and had weak KYC/AML protections for those years.

 

Reuters highlights the hacking of Eterbase among others, with some of the proceeds laundered through Binance by North Korean hacking group Lazarus, and Binance’s association with Russian drug market Hydra.

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A Binance spokesperson refuted Reuters’ findings, and the exchange told Forbes in a statement that the note is a “woefully uninformed opinion piece that uses outdated 2019 information and unverified personal attestations”.

 

Binance is already the subject of several federal investigations in the US, including another investigation by the SEC. The US Commodity Futures Trading Commission (CFTC) began an investigation into the exchange’s trading practices last year.

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