Binance is being investigated by the Securities and Exchange Commission (SEC) in the United States for alleged violations during the release of the Binance Coin (BNB). The Binance Coin is the official cryptocurrency of the Binance ecosystem, and it was introduced in 2017 through an initial coin offering (ICO).
The Securities and Exchange Commission (SEC) has charged the crypto exchange with violating securities laws during the ICO and is investigating the matter. Many ICO projects have been charged with securities regulation violations by the SEC, which thinks that most cryptocurrencies are securities. Furthermore, there have been reports that at least one U.S. person participated in the BNB ICO in 2017, prompting the SEC to launch a securities fraud investigation into the exchange.
However, Binance CEO Changpeng Zhao (CZ) wrote and released a blog in 2020, addressing some issues with the coin’s whitepaper’s wording, which might be interpreted as implying that it is a security. He said:
“In January 2019, we changed the wording around “buy-backs” and the association with “20% profits.” This was done based on a third-party legal counsel advice indicating the potential for being misunderstood as a security is higher in certain regions, and it was not accurately describing the fact that we don’t need to “buy-back.” We hold BNB.”
Reuters Shares a Behind-the-Scenes Glimpse of Binance
Binance’s activities have been the subject of some scrutiny, not just from the SEC. Reuters published a story on May 6 from an extensive investigation on the exchange’s role in fraudulent activities. Between 2017 and 2021, the exchange allegedly processed at least $2.35 billion in transactions from hackers, investment frauds, and narcotics sales, according to the investigation. During that time, it was also reported that Binance’s Know Your Customer (KYC) and Anti-Money Laundering (AML) checks were not up to par.
The report notably references the North Korean hacking group Lazarus’ participation in several of these hacks, as well as Binance’s shady dealings with Russian drug store Hydra. A Binance representative refuted all of the charges, saying:
“[The report is a] woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations. The fact is that Binance has some of the strictest AML policies in the fintech industry and plays a significant leadership role in helping law enforcement deal with cyber and financial crime. Since the article ran, we have received an outpouring of support from partners in law enforcement across the globe.”
