The SEC unveils 13 charges in a lawsuit against crypto exchange Binance

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The Securities and Exchange Commission has filed more than a dozen charges against Binance which runs the largest crypto trading site in the world.

MICHEL MARTIN, HOST:

In the world of crypto, another major company is in trouble.

STEVE INSKEEP, HOST:

Binance – like finance but with a B – Binance operates the world’s largest platform for trading cryptocurrencies, and now it’s facing a massive lawsuit from the Securities and Exchange Commission.

MARTIN: NPR’s David Gura is with us now to tell us more. David, good morning.

DAVID GURA, BYLINE: Hey, Michel.

MARTIN: What is Binance accused of?

GURA: So this company faces more than a dozen charges, some of which are quite serious, Michel, in a complaint that is more than a hundred pages long. And when you dig into it, Binance is accused of misleading customers, of steering their money to another company that’s controlled by Binance’s CEO and of putting investors’ assets at risk, according to the SEC, which describes Binance as an opaque web of corporate entities that does business around the world. And, interestingly, it has no physical headquarters anywhere, which may sound unusual, but this is how many crypto companies operate. They believe there’s no need for a headquarters. There are no borders. There’s no need for government oversight. Binance’s chief executive, who goes by his initials, CZ, says Binance’s headquarters is wherever he’s sitting. Regulators have gotten fed up with this. And what the SEC alleges, broadly, Michel, is CZ and Binance have violated and continue to violate the law.

MARTIN: Now, you said that there – that the complaint is a hundred pages long, but of those charges, are there some that stand out?

GURA: Yeah. Several of these have to do with Binance not complying with regulations. The SEC says the company has made a deliberate decision not to register with the SEC. And, you know, this gets to the heart of the battle. The head of the SEC, Gary Gensler, often says that crypto is like the Wild West. And if you play out that metaphor, Gensler sees himself as the sheriff. You know, like I said, crypto companies envision a future with a financial system that’s not government regulated. But Gensler wants to impose order and have crypto companies operate under existing securities laws. Lee Reiners teaches cryptocurrency law at Duke University.

LEE REINERS: He had been, in essence, warning the crypto industry for the better part of a year and giving them an opportunity to come in and get, you know, in compliance and to register with the SEC. And, you know, that is not something the crypto industry took him up on.

GURA: Now, recently, Gensler has been saying the runway for crypto companies to come into compliance is running out. And something Reiners told me is this lawsuit is a pretty sure sign there’s no runway left. And we’re seeing Binance customers getting skittish, Michel. They’ve withdrawn hundreds of millions of dollars’ worth of crypto from Binance since these charges were announced, according to the blockchain data firm Nansen.

MARTIN: Could you say more about the company, how it fits into the world of crypto?

GURA: Yeah. Binance may not be a household name, but if you’re in crypto, you’ll know it. This is a company that’s a little like a crypto supermarket. It has a little bit of everything. It runs two large exchanges where you can buy and sell cryptocurrency. But Binance is also a brokerage. It clears trades. There are funds that are affiliated with it. Binance is big, and it’s only gotten bigger since FTX imploded just a few months ago.

MARTIN: And does the collapse of FTX relate to what we’re seeing here?

GURA: Yeah. Absolutely, yeah. These two companies were rivals. CZ famously balked when FTX asked him for a bailout when FTX was on the brink of bankruptcy. But beyond that, FTX’s collapse changed regulators’ approach to crypto, Michel. It was catalytic. Since then, the SEC has gone after a lot of crypto companies. The SEC recently sent a warning to Coinbase saying it’s under investigation. So this Binance lawsuit is not going to be the last. There are going to be more fights ahead, including civil suits like this one. And, of course, there’s the criminal trial against FTX’s founder, Sam Bankman-Fried. That’s scheduled to start in October. And if he’s found guilty, he could spend the rest of his life in prison.

MARTIN: That is NPR’s David Gura. David, thank you.

GURA: Thank you.

(SOUNDBITE OF MUSIC)

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