However, the Binance complaint goes considerably beyond the one against Coinbase. The outcomes of these cases are likely to shape the future of the cryptocurrency industry in the United States. The SEC began with actions against some of the smaller crypto companies left standing amidst the carnage of the prior year. In recent months, the SEC has telegraphed that it won’t solely act reactively to crypto’s collapses, filing charges only after companies have been reduced to piles of rubble. But FTX was a big deal: billions of US persons’ lost, and it is clear from the record that if the existing rules were enforced against FTX then most US customers would be whole already.”Ĭrypto's Richest Man Is Waiting Out the Chaos Researcher and computer scientist Nicholas Weaver describes the shift as a reaction to the sentiment that regulatory agencies failed to prevent the FTX catastrophe: “I think with the SEC… they have long had a habit of being reactive, coming in after the manure hits the whirling blades. “The political will is there at last,” says Gerard. Now that things have collapsed, this is an easier sell - people are expecting the bad players in the industry to be held to account. It was only then that the SEC, the Commodity Futures Trading Commission, and the Department of Justice descended to belatedly clean up the mess they really should have prevented in the first place, unpopular though it might have been. Only a few months later, his own crypto empire toppled amid allegations of fraud as it became apparent that billions in customer funds had gone missing. A once-titan of the crypto industry, Sam Bankman-Fried, swooped in and extended loans to floundering platforms. The bankruptcies followed, with Voyager Digital and Celsius filing within weeks of each other, followed later by BlockFi and Genesis. Through the summer, a slew of companies limited or halted withdrawals, leaving panicked customers unable to access the crypto assets they’d stored on the platforms. The catastrophic implosion of the Terra project in May 2022 was among the first in a never-ending series of failures, soon followed by the crumbling of crypto hedge fund Three Arrows Capital, a linchpin of the sector whose insolvency destabilized other major firms. The SEC and other agencies mostly stayed out of the way. Entrepreneurs, venture capitalists, and lobbyists were describing crypto as the next iteration of finance, of technology, even of society - and influential people from the tech industry to Congress were buying the story. In 2021, the party was raging: crypto asset prices had skyrocketed, stories of overnight millionaires plastered the pages of newspapers, and companies like and FTX were splashing out millions of dollars on naming rights to sports stadiums and Super Bowl ads in hopes of convincing even more people to come join the mania. It’s tough to be the buzzkill who comes in and shuts down a party when everyone’s having a good time, and the SEC seemed to know it. These are hardly the first lawsuits that the agency has used to take aim at the industry - but they’re a marked shift. Unlike in the Coinbase suit, the Binance case also includes complaints aimed directly at the company’s CEO, Changpeng “CZ” Chao. Binance is additionally charged with engaging in unregistered securities offerings by issuing BNB, a token that the SEC alleges functions like a share in the Binance company, and BUSD, a stablecoin pegged to the US dollar. After years of regulatory turf wars over an industry widely seen as the Wild West, the SEC has planted its flag in the cryptocurrency industry as firmly as ever, hoping that courts will support the agency’s opinion that the vast majority of crypto assets qualify as a type of carefully regulated financial instrument known as securities, and agree that the unregistered crypto platforms that have set up shop in the United States are flagrantly violating the laws that regulate them.īoth cases allege that the companies were illegally operating without registering with the SEC, and offered unregistered securities in the form of crypto staking: programs in which customers lock up their crypto tokens in exchange for rewards. A second lawsuit came the very next day against Coinbase, the largest exchange based in the United States. The Securities and Exchange Commission filed suit on Monday against global giant Binance, the largest cryptocurrency exchange in the world.
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