Crypto market cracks 5%, Bitcoin at 3-month low after US SEC sues Binance

In its complaint, the SEC alleged that Binance and Zhao had "free reign" over billions of dollars of crypto assets from the US


Raghav Aggarwal New Delhi

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The cryptocurrency market saw a sharp sell-off on Monday after news arrived that the United States Securities and Exchange Commission (US SEC) has sued the world's largest crypto exchange Binance and its founder and chief executive officer (CEO) Changpeng Zhao (CZ). The complaint accuses Binance of secretly controlling customers' assets, allowing them to divert customer funds according to their whims.

In the last 24 hours, the global crypto market cap has fallen over 4.5 per cent, according to CoinMarketCap. Bitcoin, the largest crypto token by market cap, has fallen nearly 5 per cent and was trading at $25,720. This is the lowest it has touched since March 17.

Ethereum, Cardano, Solana, Dogecoin, and Polygon, among other tokens, were also trading deep in the red.

Moreover, Binance Coin (BNB), a token used to pay transaction and trading fees on Binance, fell nearly 9 per cent in the last 24 hours.

"Bitcoin is currently still holding around the very important psychological level of sub-$25,700, whereas a bounce back could be likely from here, breaking the same can lead it to $20,000 levels. The SEC’s lawsuit have explicitly called out several popular coins like SOL, ADA, MATIC as securities causing their price to significantly fall as well," said Shubham Hudda, senior manager, CoinSwitch Markets Desk.

In its 136-page complaint, the SEC said that Binance created separate US entities "as part of an elaborate scheme to evade US federal securities laws." For three years, till June 2022, Sigma Chain, a trading firm owned by CZ, was engaged in artificially inflating the trading volume of crypto asset securities on the Binance.US platform, it added.

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"We will continue to cooperate with regulators and policymakers in the US and across the globe because that is the right thing to do," Binance said in a blog post on Monday. However, it added that Binance is not a US exchange, so the SEC's actions are "limited in reach." 

Binance was founded in Shanghai in 2017 by CZ, a Canadian citizen born and raised until 12 in China. While its holding company is based in the Cayman Islands, Binance says it does not have a headquarters and has declined to state the location of its main exchange.

In its complaint, the SEC also alleged that Binance and Zhao had "free reign" over billions of dollars of crypto assets from the US.

The SEC's accusations are the latest in a series of legal woes for Binance. In March, another regulator in the US, the Commodity Futures Trading Commission, filed its own lawsuit against Binance, accusing it of operating in the country illegally. The exchange is also under investigation by the US Department of Justice.

The regulatory agencies globally have tightened their scrutiny of crypto companies since the dramatic collapse of the crypto exchange FTX last year.

"The market will respond sharply as the Binance-SEC saga unfolds; we should brace ourselves for a choppy market in the coming weeks," Shivam Thakral, CEO of Indian crypto exchange BuyUcoin, told Business Standard. He added that this also highlights the need for regulatory clarity in the global crypto ecosystem.

First Published: Jun 6 2023 | 9:40 AM IST

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