Crypto stocks fall as Binance SEC lawsuit ripples through industry

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June 5 (Reuters) – Cryptocurrencies and shares of crypto and blockchain-related companies fell on Monday after the U.S. securities regulator sued crypto exchange Binance, another blow to the industry.

The United States Securities and Exchange Commission has sued Binance and its CEO Changpeng Zhao for secretly controlling Binance.US as part of a “network of deception” to evade US laws, among other charges. Reuters reported earlier that Binance controlled the bank accounts of its US subsidiaries, although it claims it was independent.

The SEC also said Binance artificially inflated trading volumes on the platform, misappropriated customer funds, and failed to restrict U.S. customers’ access to its platform, and misled investors about monitoring controls on the platform. market.

Bitcoin, the world’s largest cryptocurrency, fell 5.45% after falling to its lowest level since mid-March following the news. Binance cryptocurrency fell 9.72%.

The charges in federal court in Washington, D.C., are the latest in a series of enforcement actions brought by the agency in an effort to shrink the cryptocurrency industry, which the SEC Chairman, Gary Gensler, described as “the Wild West”.

The SEC crackdown has prompted some crypto companies to increase compliance, increase products and expand overseas, moves that some market watchers said would likely be accelerated by this latest action against the biggest. crypto exchange in the world.

“This is yet another devastating targeted attack on the crypto ecosystem. Soon the SEC will have no one to prosecute,” said John Reed Stark, former head of the Office of Internet Enforcement at the SEC. DRY.

In statements, Binance said it cooperated with SEC investigations and “worked hard to answer their questions and address their concerns,” including trying to reach a negotiated settlement.

“With today’s complaint, the SEC has abandoned this process and has instead chosen to act unilaterally and file a lawsuit. We are discouraged by this choice,” the company said.

The SEC’s decision to drop a settlement and sue underscores the aggressiveness with which it has approached the cryptocurrency industry, which the agency says has violated its trading and trading rules. issuance of securities. The SEC did not immediately respond to a request for comment.

In April, the SEC commissioned crypto exchange Bittrex Inc to operate an unregistered securities exchange, brokerage, and clearing agency, and settled with Kraken in February for $30 million over the staking service. american crypto from stock exchange.

Coinbase Global Inc revealed in March that the SEC had threatened to sue the company over some of its products.

Coinbase and Kraken did not immediately respond to a request for comment. Bittrex declined to comment.

Many big crypto companies started out believing that their products fell outside the jurisdiction of the SEC and say the rules are confusing. They are now “in a lot of trouble,” said Georgetown University finance professor James Angel.

“They better hire the best regulatory advisers money can buy, because they’re going to need them.”

Shares of Coinbase (COIN.O) fell 9.1% following the announcement of the SEC charges against Binance. Crypto miner Riot Platforms Inc (RIOT.O) was down 8.8% while Marathon Digital (MARA.O) was down 8.4% and Hut 8 Mining was down 4.6%.

Following some of the SEC’s actions against crypto companies this year, several companies have invested in expanding their operations outside of the United States. Coinbase and crypto exchange Gemini launched international exchanges for crypto derivatives in May.

Still, regulatory actions in the United States “underscore the need to establish collateral in these markets to meet investor and customer expectations,” said Rajeev Bamra, senior vice president and head of decentralized finance and digital asset strategy at Moodys Investors Service.

“Therefore, these fees have the potential to reshape the regulatory landscape for digital assets,” he said.

Reporting by Sinad Carew and John McCrank in New York, Manya Saini in Bengaluru and Hannah Lang in Washington; Editing by Michelle Price, Leslie Adler and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

Hannah Lang

Thomson Reuters

Hannah Lang covers fintech and cryptocurrency, including the companies driving the industry and the political developments governing the sector. Hannah previously worked at American Banker where she covered banking regulation and the Federal Reserve. She graduated from the University of Maryland, College Park and lives in Washington, DC.

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