The announcement by the US Securities and Exchange Commission (SEC) that it has filed a lawsuit against Binance, Binance.USD and Binance CEO Changpeng Zhao (CZ) may come as some surprise, but the SEC’s focus on Binance is something that the industry was aware of.
Changpeng Zhao immediately responded after the news, saying, “The media gets the information before we get it.”
‘Disappointing’
Binance calls the lawsuit “disappointing” in a new blog post and underscores yet again the SEC’s failure to provide regulatory clarity, which negatively impacts financial innovation.
In a later statement that came in by email, Binance elaborates on some legal issues, in which it promises, among other things, to fully engage in the fight with the SEC.
Swan Bitcoin CEO Cory Klippsten is less soft on Binance. “These practices of Binance have essentially been public secrets, so no one operating in this industry should be surprised by the allegations,” said Klippsten.
That the SEC does indeed have a case is evidenced by a statement by a Binance compliance officer from 2018: “We operate like a f * cking unlicensed stock exchange in the United States bro.”
Strange practices
In the United States (and actually nowhere in the world) you can open a stock exchange without a permit. In the financial world, we speak of a security when a certain profit expectation is attached to a financial instrument, which arises from the activities of the issuing entity (for example, a share of a company).
In this case, Binance employees seem to admit that they also realize that they are an unlicensed stock exchange. For many tokens, this could be the end of the story, so that in theory only Bitcoin could remain.
At this point, only Bitcoin can we say with certainty that it does not qualify as a security. Also, the SEC’s case against Binance highlighted Brian Brooks’ brief stint as CEO at Binance.
“What became clear to me was that CZ was the CEO of BAM Trading and not me. (…) I realized, huh, I’m not the one running this company and the mission I signed up for isn’t the mission. As soon as I realized that I was gone,” said Brooks.
