SEC will scrutinize DeFi exchanges more

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SEC to further scrutinize DeFi exchanges; Do Kwon paid millions of dollars to his lawyers before the Terra collapse; CFTC says Binance deliberately broke the rules.

The US Securities and Exchange Commission (SEC) plans to oversee DeFi projects.

According to The Block’s report, the regulator will announce that the rules for exchanges in the US also apply to DeFi platforms. The SEC’s move will not be to introduce a new rule, but rather to clarify that the existing rule also applies to decentralized finance.

The SEC’s proposal will be subject to a vote by the commission.

SEC’s pressure on the crypto industry grows

This move by the SEC will also formalize the regulator’s claim to jurisdiction over decentralized finance. Following this development, it is estimated that the SEC’s investigations into DeFi projects may increase. Until now, the SEC has focused more on centralized crypto companies.

SEC Chairman Gensler used the following statements at the meeting held today:

“Make no mistake. Many cryptocurrency platforms already match the current definition of an exchange, so they have an obligation to comply with securities laws. Yet these platforms act as if they have a choice as to whether or not to comply with our laws. No, they don’t.”

With the SEC’s latest statements, DeFi platforms may face legal problems. If the SEC qualifies these projects as stock exchanges, the projects will need to be registered with the regulator.

Gensler continued:

“The proposal will specifically require that these protocols, which bring together buyers and sellers of [..] securities, comply with the rules of the exchange”

If the proposal is accepted, the regulator will also publish an economic analysis of the DeFi sector.

Read more:  SEC qualifies 61 cryptocurrencies as securities in Binance lawsuit

Do Kwon paid millions of dollars to his lawyers before the Terra collapse

South Korean prosecutors have confirmed that Terraform Labs CEO Do Kwon sent 9 million won ($7 million) to South Korea’s famous law firm Kim & Chang just before the collapse of the Terra ecosystem.

Kwon’s decision to send millions to the law firm of Kim & Chang was described as a deliberate move by prosecutors, KBS News reported. Allegedly, Kwon confirmed that he was aware of the impending collapse and predicted anticipated legal issues.

Do Kwon paid $7 million to lawyers before Terra collapse

Prosecutors trying to connect with Kwon’s intention to prepay the law firm believe this information will help the ongoing fraud case. It’s also worth noting that Kim & Chang’s lawyers visited Montenegro to meet with Han Chang-joon, Kwon and Terraform’s former chief financial officer.

As is known, Kwon was previously arrested at Podgorica airport in Montenegro while trying to fly to Dubai with false documents. Following his arrest, both the US and South Korean authorities requested Kwon’s extradition. However, the court has not yet made a decision.

South Korean prosecutors, on the other hand, suspected on April 7 that Kwon had illegally converted funds from LUNA to Bitcoin (BTC). Prosecutors then asked Binance to stop all Kwon-related withdrawal requests.

Prosecutors identified a total of 414.5 million won ($314.2 million) of illegal assets associated with Terraform Labs co-founder Kwon and its partners, of which approximately 91.4 million won ($69 million) were reportedly directly linked to Kwon.

CFTC says Binance deliberately broke the rules

CFTC Chairman Rostin Benham spoke about the allegations against Binance and claimed that the cryptocurrency exchange operates outside of US law.

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Speaking at the DeCenter Spring Conference at Princeton University on April 14, Benham said that Binance knowingly allowed US citizens to participate in the exchange and deliberately broke the rules of operations.

Benham used the following statements in his statement:

“These are not ignorant people. They start big companies and offer futures contracts and derivatives to US customers.

If you are going to offer futures contracts in the US, you must be registered with the CFTC and comply with the law”

CFTC vs. Binance

Benham’s comments are based on the institution’s lawsuit against Binance and its CEO, Changpeng Zhao. The CFTC accuses Binance of trading unregistered futures, offering illegal commodity options, and failing to meet AML/KYC requirements.

The main argument for the CFTC’s lawsuit against Binance is based on alleged evidence that Binance and CZ continue to receive US customers despite the policy prohibiting such actions, and that the company knowingly engages in illegal activities.

While the CFTC Chairman continues to comment on the ongoing investigation, Binance emphasizes that it continues to work in good faith for global compliance.