On June 5, the US Securities and Exchange Commission (SEC) charged the cryptocurrency exchange Binance Holdings Ltd and its founder Changpeng Zhao with thirteen counts of security violations. These include engaging in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. “We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. Why it matters: According to the SEC, Binance has been misleading investors about its risk control practices and also exercising control of the platforms’ customers’ assets, permitting them to mix customer assets or divert them as they wished. One of the places where the customers' assets have been diverted, as per SEC, is to an entity Zhao owned and controlled called Sigma Chain (a blockchain solutions and advisory company). Binance is the biggest cryptocurrency exchange in the world and as of August last year, it has 90 million customers worldwide. This means that any issues in its asset management affect a large part of the cryptocurrency ecosystem. The alleged asset diversion to Sigma Chain also doesn’t bode well given how FTX's mishandling of customer funds negatively affected the crypto market last year. SEC’s allegations against Binance: Zhao and Binance claimed that US customers were restricted from transacting on…
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