top of page

6th June 2023 > > Binance.


It’s all about Binance. Oh, and XRP too …

Market Snap

Market Wrap

The Binance news (see below) was never going to be received well though a 4% drop suggests a greater degree of resilience than I would have predicted.

Curious Cryptos’ Commentary – Binance

The CCC has long been critical of Binance founder and CEO Changpeng Zhao not only for his apparent immaturity, but also for the disdain he has publicly demonstrated towards legislation and regulation. It is no surprise to regular readers that Binance has now fallen foul of the SEC (Securities and Exchange Commission) but the depth and scale of the charges are undoubtedly damaging.

The lawsuit ( weighs in at a hefty 136 pages. I will be honest with you – the CCC research team does not have the resources to have properly looked at all the details in time for this missive. Indeed the summary itself stretches to five pages. But we try to do our best.

Some choice quotes from that summary include the following:

“This case arises from Defendants’ blatant disregard of the federal securities laws and the investor and market protections these laws provide. In so doing, Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”

Securities laws are based on a concept of investor protection. Though these laws can be breached in a multitude of ways, putting investors’ assets at risk without appropriate safeguards in place is the core concern of the SEC. That doesn’t mean that investors cannot lose money, but it does mean breaches of securities laws moves responsibility for losses away from investors and into the arms of the securities provider.

“Defendants have unlawfully solicited U.S. investors to buy, sell, and trade crypto asset securities through unregistered trading platforms available online at (“ Platform”) and Binance.US (“Binance.US Platform”) (collectively, “Binance Platforms”).”

This is the SEC’s core point – that Binance as a trading platform was unregistered. Though this case asserts that some cryptos are securities, that isn’t particularly relevant here. The SEC makes this point plain:

“First, Binance and BAM Trading, under Zhao’s leadership and control, have unlawfully offered three essential securities market functions—exchange, broker-dealer, and clearing agency—on the Binance Platforms without registering with the SEC. Acutely aware that U.S. law requires registration for these functions, Defendants nevertheless chose not to register, so they could evade the critical regulatory oversight designed to protect investors and markets.”

This comment gets directly at the heart of the CCC’s criticism of Binance and its CEO, reinforced a few paragraphs later:

“Starting in or around 2018, determined to escape the registration requirements of the federal securities laws, Defendants—under Zhao’s control—designed and implemented a multi-step plan to surreptitiously evade U.S. laws. As Binance’s Chief Compliance Officer admitted, “we do not want [Binance].com to be regulated ever.”

A key part of the process of establishing a regulated entity is the implementation of controls to ensure the segregation of clients’ funds from the firm’s funds. Failure to do so is looked upon very poorly:

“Lacking regulatory oversight, Defendants were free to and did transfer investors’ crypto and fiat assets as Defendants pleased, at times commingling and diverting them in ways that properly registered brokers, dealers, exchanges, and clearing agencies would not have been able to do. For example, through accounts owned and controlled by Zhao and Binance, billions of U.S. dollars of customer funds from both Binance Platforms were commingled in an account held by a Zhao-controlled entity (called Merit Peak Limited), which funds were subsequently transferred to a third party apparently in connection with the purchase and sale of crypto assets.”

That is one hefty jail sentence right there.

There is more, with accusations of selling unregistered securities, specifically in the form of BNB (Binance Coin) and BUSD (Binance stablecoin), and many others.

The SEC refers to written communication from Binance’s Chief Compliance Officer in 2018:

"We are operating as a fking (sic) unlicensed securities exchange in the USA bro.”

After 25 years of working in investment banks, I can assure you that such an approach, and use of language, by the Compliance Department is unthinkable in a business run by grown-ups.

The other 131 pages, from what I have seen, do not make for light or pleasant reading. The question for us as crypto investors, is this - what will be the impact of this lawsuit?

Obviously crypto prices took a tumble overnight, but I think we have seen resilience on that front.

Zhao’s international movements will forever be restricted. I would guess he is now on a plane to Dubai which has no extradition treaty with the US, though that might change at any time, especially with such a high-profile individual now effectively on the run.

Binance will continue operating. It has gained regulatory licenses in some jurisdictions though these might be up for review following the SEC’s actions.

The CCC treasury maintains a small portion of funds at Binance for trading purposes on behalf of the Curious Cryptos Limited hedge fund. The investment committee will review that decision over the course of today.

Cryptos held on centralised cryptocurrency exchanges will continue their downward trajectory.

Coinbase will attract new clients and its business will grow relative to the competition.

One last point.

The timing of this action is most interesting coming as it does one week before a potential decision on the action taken by the SEC against Ripple Labs. If the SEC believes it will lose that case, this is a mightily handy smokescreen.

9 views0 comments

Recent Posts

See All

23rd July 2024 > > Nashville.

tl;dr It’s all happening in Nashville this weekend. Market Snap Market Wrap Despite twelve consecutive days of inflows to the spot BTC ETFs, and some like yesterday at over half a billion dollars were


bottom of page