Binance, Binance.US and Changpeng “CZ” Zhao allegedly offered unregistered securities to the general public in the form of the BNB token and Binance-linked BUSD stablecoin.

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance, the popular cryptocurrency exchange, as well as its CEO Changpeng Zhao (CZ) and Binance.US. The SEC alleges that the exchange violated federal securities laws by offering unregistered securities, including the BNB token and Binance-linked BUSD stablecoin, to the public.

The suit also claims that Binance’s staking service violated securities laws. (Coindesk)

The SEC further accuses the company of failing to register as a clearing agency, broker, and exchange, and alleges that Binance allowed U.S. citizens to trade on its platform despite claiming otherwise. The SEC also claims that it allowed for the commingling of customer funds and that CZ secretly controlled Binance.US.

The SEC asserts that various tokens, including SOL, ADA, MATIC, COTI, ALGO, FIL, ATOM, AXS, Axie Infinity, and MANA, are securities. The lawsuit goes on to reveal instances of poor financial controls at the crypto exchange, leading to the diversion of customer funds for potential personal use.

CZ allegedly received millions of dollars from Binance bank accounts. The suit also references the “Tai Chi” documents, which suggest that Binance planned to exit the U.S. officially while maintaining a presence through an affiliate. Binance also had access to Binance.US’s wallets, assets, and custody tools, raising concerns.

Furthermore, market makers were employed to boost trading volume on Binance.US, creating conflicts of interest. Binance.US operated its own OTC desk, with Alameda Research as its sole counterparty.

SEC Chair Gary Gensler stated in a press release that the lawsuit alleges an extensive web of deception, conflicts of interest, lack of disclosure, and evasion of the law by Binance and CZ.

The news of the lawsuit caused a plunge in the price of Bitcoin. At the time of writing the leading cryptocurrency was trading at $25,682, down 5.64%.

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