On June 5, 2023, the SEC filed an extensive civil complaint against Binance Holdings Limited, its assorted affiliates, and its beneficial owner and CEO, Changpeng Zhao, alleging multiple violations of the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC and Crypto
For years, the SEC has clarified that crypto enforcement is among its highest priorities. In 2022, the SEC brought a total of 30 cryptocurrency-related enforcement actions, up 50% from 2021. And, through the first half of 2023, the SEC is on pace for more than a 25% increase from last year’s numbers. Gary Gensler, SEC Chair, bluntly stated his concern with the crypto industry in a recent Wall Street Journal interview:
“I’ve seen some non-compliance from time to time in traditional finance, but I’ve never seen a whole field so built upon non-compliance with law, and frankly speaking, that’s what a lot of the [cryptocurrency] business model is.”
The Binance lawsuit illustrates how the SEC will litigate such alleged wholesale non-compliance taking a utilitarian approach to the crypto industry, essentially overlaying the functions and participants in the traditional securities industry against their counterparts in crypto.
inance Holdings Limited, the lead defendant, is a Cayman Islands-based limited liability company that operates the binance.com platform – an international crypto asset-trading platform serving customers in more than 100 countries.
Binance operated through a web of subordinate or affiliated entities, in multiple jurisdictions, all tied to Zhao as their beneficial owner. As the Complaint sets forth, Zhao “has been dismissive of ‘traditional mentalities’ about corporate formalities and their
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Author: Terence Grugan
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