SEC still looking into possible FTX-style fraud on Binance.US!

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SEC still looking into possible FTX-style fraud on Binance.US; Binance CEO announces plans after CZ’s resignation; Coinbase shares hit 18-month high after Binance charges

SEC thinks Binance committed more offences

According to a report in the Wall Street Journal on 27 November, the US Securities and Exchange Commission continues to seek evidence that Binance.US has a backdoor to potentially control customer assets in a manner similar to FTX.

In June, the SEC filed a lawsuit against Binance and Binance.US, alleging that the exchange was involved in the sale of unregistered securities and accusing Binance and its founder of engaging in a complex conspiracy involving fraud, conflicts of interest, lack of disclosure and willful disregard for the law.

One of the allegations was that the exchange diverted customer funds as it saw fit, including sending money to the Swiss-based Sigma Chain, which is under Zhao’s control.

During a hearing in federal court on 27 November, lawyers for Binance.US reportedly argued that the securities regulator had no evidence of misappropriation of assets.

The request came after Binance and CZ pleaded guilty last week to violating US money laundering laws as part of a $4.3 billion settlement with the US Department of Justice, the Treasury Department and the Commodity Futures Trading Commission (CFTC).

However, the DOJ’s complaint did not include any of the fraud-related allegations from the SEC’s June complaint against the cryptocurrency exchange.

Binance.US asked the SEC to settle the dispute

Judge Faruqui, who presided over the case between Binance and the SEC, reportedly said that the guilty verdicts reduced the likelihood of Binance.US and CZ misappropriating customer assets.

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Faruqui asked Binance.US and the SEC to resolve the dispute and inform him by 15 December.

Meanwhile, CZ is currently awaiting a court review to determine whether he can leave the US and return two weeks before his scheduled sentencing date in February.

The judge has ordered that CZ not be allowed to travel to the United Arab Emirates, where he is primarily based, until the judge rules on the US government’s request for review.

Binance CEO announces plans after CZ’s resignation

Binance’s new CEO Richard Teng announced his intention to accelerate the growth of the crypto exchange following the resignation of Changpeng Zhao. 

In a 27 November blog post, Teng said he took the leadership of Binance with CZ’s support after the former CEO left as part of an agreement with US officials. According to Teng, Binance plans to maintain a user-centred approach and promote web adoption.

Teng said that:

“I can’t wait to start my new role quickly, and I know there will be more opportunities to share my thoughts and happenings with the community through blog posts like this one, social media accounts like Twitter and LinkedIn, and conferences”

It is currently unclear how Teng will manage affairs at Binance following CZ’s departure. Blockchain analytics firm Nansen said that 24 hours after the Binance deal with the US on 22 November, there was no “massive outflow of funds” and the exchange’s total assets rose to over $65 billion.

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Teng became the exchange’s new CEO after CZ agreed to step down as part of a deal with the Justice Department. CZ agreed to pay $150 million to regulators, pleading guilty to a felony charge. The exchange agreed to pay a $4.3 billion fine.

Authorities are trying to restrict CZ’s right to travel, who currently lives in the UAE. The former Binance CEO could face up to 18 months in prison after the trial in February 2024.

Coinbase shares hit 18-month high after Binance charges

Shares in crypto exchange Coinbase (COIN) hit an 18-month high after rival exchange Binance and its former CEO Changpeng Zhao pleaded guilty to money laundering and sanctions violations in the United States.

Since the beginning of 2023, Coinbase’s share price (COIN) has risen from $30 to $114, an increase of 250%.

Coinbase’s share price rise comes a week after Binance and its founder Changpeng “CZ” Zhao pleaded guilty to money laundering, violating US sanctions and operating an unlicensed money transfer business.

Zhao and Binance settled with the US for $4.3 billion, which included Zhao stepping down as CEO and Binance accepting compliance monitors from the DOJ and Treasury Department for up to five years.

Last year also saw Coinbase make significant gains with spot bitcoin and ether exchange-traded funds (ETFs) being approved in the US.

Analysis by Bloomberg ETF analyst James Seyffart shows that Coinbase is currently responsible for 13 of the 19 spot crypto ETFs pending with the Securities and Exchange Commission.

Coinbase is responsible for 70% of the 19 spot crypto funds. Source: James Seyffart/X

However, Coinbase is facing a lawsuit from the SEC alleging that the exchange failed to register with the regulator and listed several tokens in violation of US securities laws.

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Coinbase had sought to dismiss the case, questioning the SEC’s authority to oversee crypto.

SEC still looking into possible FTX-style fraud on Binance.US; Binance CEO announces plans after CZ's resignation; Coinbase shares hit 18-month high after Binance charges