Binance, the largest cryptocurrency exchange on the planet, is not experiencing an ideal period in recent weeks. As if it weren’t enough that investors withdrew an estimated $32 million from investment products in May, resulting in nearly a two-month capital outflow, the exchange is now facing legal issues, as reported by The New York Times.
Binance faces a lawsuit
The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and its founder Changpeng Zhao for allegedly circumventing federal securities laws. The New York-based publication is basing this claim on court records available to the Reuters news agency.
One of the most serious allegations is the repeated violation of investor protection rules as a direct result of operating unregistered exchanges and distorting audit controls, among other issues. The SEC is warning both existing and potential investors about dubious practices and urging caution in their investment decisions.
The world’s largest exchange in trouble
Zhao took to Twitter to express that his team is thoroughly reviewing the entire situation. However, he distanced himself from the regulatory actions taken. He categorically denied any allegations that the assets of existing clients were at risk. He also stated that, considering the evidence gathered, the lawsuit appears highly unfounded.
It is evident that Binance will defend itself against the tarnished reputation. Zhao also reminded that the company had been closely cooperating with the SEC for almost three years, emphasizing the need for a legislative framework to regulate digital assets.
Unfortunately, the case had a logical impact on the current cryptocurrency market. Both Bitcoin and Ethereum experienced a decline of approximately 5%. The stock of competitor Coinbase even saw a 10% drop.
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