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| 2 minutes read

SEC Sues Crypto Exchange Binance and Founder Changpeng Zhao

On June 5, 2023, the Securities and Exchange Commission (“SEC”) filed a complaint in the U.S. District Court for the District of Columbia against Binance Holdings Limited (“Binance”), the world’s largest crypto asset trading platform, and its founder, Changpeng Zhao (“CZ”), with a variety of securities law violations (the “Complaint”).  The SEC also brought allegations against BAM Trading Services Inc. (“BAM Trading”) and BAM Management US Holdings Inc. (“BAM Management”), two U.S. based affiliates of Binance (the “BAM Defendants”). 

According to the Complaint, defendants unlawfully solicited U.S. investors to buy, sell, and trade crypto asset securities through unregistered trading platforms available online at and Binance.US.  According to SEC Chair Gary Gensler, “[CZ] and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasions of law.”  “[CZ] and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

Among other things, the Complaint contains the following allegations against the defendants: 

Unregistered Exchange, Broker, and Clearing Agency.  The SEC alleges that since July 2017, and Binance.US operated as exchanges, brokers, dealers, and clearing agencies while earning $11.6 billion in revenue from U.S. customers in violation of SEC registration requirements.  According to the Complaint, given the lack of 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.” 

Unregistered Offer and Sale of Crypto Assets.  The SEC also charged Binance for the unregistered offer and sale of BNB, BUSD, and crypto-lending products known as “Simple Earn” and “BNB Vault.”  In addition, the SEC charged BAM Trading with the unregistered offer and sale of the Binance.US staking-as-a-service program.  The Complaint further alleges that Binance secretly has control over assets staked by U.S. customers in BAM Trading’s staking program.

Failure to Restrict U.S. Investors from  The SEC alleges that in September 2019, CZ and Binance created the BAM Defendants as part of an elaborate scheme to evade U.S. federal securities laws by claiming that BAM Trading operated the Binance.US platform independently and that U.S. customers were not able to access the platform.  In reality, however, CZ and Binance allegedly maintained substantial involvement and control over the U.S. entity and CZ directed Binance to allow and conceal many high-value U.S. customers access to  For example, according to the Complaint, Binance’s chief compliance officer messaged a colleague in December 2018, “we are operating as a fking unlicensed securities exchange in the USA bro” (emphasis added).

Misleading Investors.  The SEC further alleges that the BAM Defendants misled Binance.US customers and equity investors about the truth of market surveillance and controls to detect and prevent manipulative trading on the Binance.US platform’s crypto asset trading volumes.  For example, the Complaint alleges that Binance engaged in wash trading with undisclosed “market making” trading firm Sigma Chain, which was also owned by CZ. 

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While not unexpected, the SEC bringing charges against the world’s largest crypto exchange is a dramatic event, and could have ripple effects across the crypto industry.  


regulatory & investigations, sec, cryptocurrency, fintech