“Through thirteen 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 statement. “The complaint further alleges that the strategic and targeted wash trading largely perpetrated by the Binance US platform’s primary undisclosed ‘market making’ trading firm Sigma Chain, also owned by Zhao, demonstrates the falsity of statements … made about its market surveillance and controls.”
Expounding details of the case, the SEC, which acts as the US stock market’s regulator, said Zhao and Binance worked to subvert “their own controls” to allow high-net worth US investors and customers to continue trading on Binance’s unregulated international exchange.
“They attempted to evade US securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value US customers on their platforms,” the regulator said. “The public should beware of investing any of their hard-earned assets with or on these unlawful platforms.”
Zhao, who lives in Dubai, dismissed the SEC’s charges on Twitter by saying “4,” a popular refrain in Binance’s community urging users to ignore fear, uncertainty, and doubt, or “FUD.”
Binance, in a statement also circulated on Twitter, described the SEC’s lawsuit as “baseless” and “unjustified by the facts, by the law, or by the Commission’s own precedent." The crypto exchange operator added that it intends “to defend ourselves vigorously”.
It accused the SEC of seeking a “near eradication” of the crypto industry with similar action against other names in the business such as Coinbase, Gemini, and Kraken.
Binance called on the US Congress to intervene with bipartisan legislation to create a workable regulatory regime for digital assets and rein in what it called bureaucratic overreach, without which “our country’s role as a leader and innovator will continue to be undermined.”