WASHINGTON (AP) 鈥� The world's largest cryptocurrency exchange Binance and its founder Changpeng Zhao are accused of misusing investor funds, operating as an unregistered exchange and violating a slew of U.S. securities laws in .
Filed in the U.S. District Court for the District of Columbia, the Securities and Exchange Commission lawsuit on Monday lists thirteen charges against the firm 鈥� including commingling and divert customer assets to an entity Zhao owned called Sigma Chain.
Binance is a Cayman Islands limited liability company founded by Zhao and the charges are familiar to practices uncovered after the collapse of the second largest cryptocurrency exchange, FTX, last year.
The lawsuit lays out the extent to which the firms owners knew of the alleged legal violations: "Binance鈥檚 CCO bluntly admitted to another Binance compliance officer in December 2018, 鈥渨e are operating as a fking unlicensed securities exchange in the USA bro.鈥�
SEC Chair Gary Gensler in a written statement that Zhao and Binance 鈥渆ngaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.鈥�
鈥淭he public should beware of investing any of their hard-earned assets with or on these unlawful platforms,鈥� Gensler said.
In a social media post, Binance said that it has been cooperating with the SEC's investigation but said that the agency 鈥渃hose to act unilaterally and litigate.鈥�
鈥淲hile we take the SEC鈥檚 allegations seriously, they should not be the subject of an SEC enforcement action, let alone on an emergency basis. We intend to defend our platform vigorously,鈥� the company said in a Twitter post. 鈥淯nfortunately, the SEC鈥檚 refusal to productively engage with us is just another example of the Commission鈥檚 misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry.鈥�
The lawsuit comes roughly eight months after the collapse of FTX, which was also accused of co-mingling customers' funds and investing the proceeds in high-risk investments that customers were unaware they were participating in.
U.S. prosecutors and the SEC charged FTX's founder Sam Bankman-Fried with a host of in December. His criminal trial is likely to be in the fall.
鈥淭he new complaint from the SEC against Binance is a laundry list of charges laying out exactly the same claims that many in the Bitcoin and crypto communities have made against Changpeng Zhao and his companies for many years. These practices of Binance have essentially been open secrets, so no one who operates in the space will be surprised by any of the charges,鈥� said Cory Klippsten, CEO of Swan Bitcoin, a bitcoin financial services company.
U.S. regulators have gone after Binance before.
In March, the Commodity Futures Trading Commission against Binance and Zhao in the U.S. District Court for the Northern District of Illinois charging them with numerous CTFC violations.
The complaint also charges Samuel Lim, Binance鈥檚 former chief compliance officer, with aiding and abetting Binance鈥檚 violations.
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AP Business Writer Ken Sweet contributed to this report from New York.
Fatima Hussein, The Associated Press
