Markets Dip Red After SEC Sues Binance

Crypto markets sank late Monday morning in New York on news that the largest global crypto exchange Binance is facing several charges from the SEC.

Bitcoin (BTC) and ether (ETH) lost as much as 2.5% and 2%, respectively at time of publication. Binance’s native BNB token fell as much as 7% immediately after the lawsuit announcement.

The SEC alleges Binance misused consumer funds and engaged in unauthorized security sales, according to court documents released Monday. The agency also claims BNB and Binance’s stablecoin, BUSD, which briefly depegged Monday, are securities.

“Binance and BAM Trading, under [Changpeng] Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets,” the court filing read.

The SEC claims that BAM Trading’s staking program is an investment contract and therefore a security, which Binance failed to register with the agency.

The charges are reminiscent of allegations Sam Bankman-Fried faces over his now-collapsed exchange, FTX. The SEC claims Bankman-Fried transferred consumer funds from the exchange to a trading entity he owned; Alameda.

The SEC uses similar language in its Binance suit, explicitly noting that consumer funds were allegedly traded with third parties.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.