Decoding the SEC’s lawsuit against Binance: Overview of important information and data

Overview of SEC lawsuit against Binance: Key information and data

Yesterday, the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its CEO Changpeng Zhao for violating US securities regulations. Cryptocurrency researcher 0xLoki analyzed the document and believes that the likely outcome of this civil lawsuit will be a large fine, with the worst-case scenario being Binance completely exiting the US market.

Target of SEC lawsuit: 3 Binance entities + CZ himself; Allegations: CZ and the aforementioned companies violated: 1) Issuance and sale of unregistered securities; 2) Facilitation of trading of unregistered securities on the Binance platform; 3) Combination of core securities market functions and intentional evasion of registration; 4) Clear violation of conflict of interest principles. SEC’s demands: 1) Permanent injunction against further illegal activities; 2) Restitution of illegal gains; 3) Prohibition of interstate trade channels and means (i.e., business rights) for CZ and related entities to engage in related illegal business; 4) Imposition of civil penalties on defendants; 5) Appropriate compensation for investor interests.

Important data: Binance’s 2019 internal report showed that it had 1.47 million US users, and as of May 2021, US VIPs still accounted for 63% of Binance’s VIP trading volume; CZ-controlled Sigma Chain AG engaged in fake trading from 2019 to 2022, with the highest proportion of wash trading accounting for 35.5% of daily trading volume; In the 2022 fiscal year, SEC initiated 760 enforcement actions, ordering a total payment of $6.439 billion.

Summary: In nature, it is still a civil lawsuit, and the worst-case scenario is the closure of Binance US, Binance’s main site completely exiting the US market, and fines. Regarding the classification of finance/staking as securities, Coinbase/Gemini’s case can be referenced. If these allegations are proven, the fine is expected to be significant, but it will likely end there.