What happened
Shares of many cryptocurrencies and crypto-related stocks fell today after the Securities and Exchange Commission (SEC) sued the world's largest crypto exchange, Binance.
Shares of the large U.S.-based crypto exchange Coinbase (COIN -0.34%) traded roughly 12.5% lower as of 1:41 p.m. ET today, while shares of Bitcoin miner Riot Platforms (RIOT 1.94%) traded roughly 9.4% lower.
Meanwhile, since late afternoon yesterday, the price of cryptocurrency Shiba Inu (CRYPTO:SHIB) was down roughly 7.7%.
Image source: Getty Images.
So what
Earlier today, the SEC continued its crypto crackdown in a big way by filing 13 charges against various entities of Binance, including Binance.US and Binance founder Changpeng Zhao.
The SEC alleges that Zhao and Binance made public statements saying that customers in the U.S. couldn't use Binance.com and that Binance.US operated as an independent trading platform specifically for U.S. investors. But according to the SEC, Zhao and Binance allowed some select U.S. customers to conduct transactions on Binance.com and in reality controlled Binance.US "behind the scenes."
SEC Chair Gary Gensler said in a statement:
Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied.
The SEC also alleges that Binance and Binance.US operated an unregistered securities exchange, broker-dealer, and clearing agency, and conducted an unregistered offering and sale of Binance's crypto token Binance USD and its stablecoin BNB.
Binance issued a response to the lawsuit, stating, "We intend to defend our platform vigorously." Binance also said that it had been cooperating with the SEC's investigations and had engaged in "good-faith discussions to reach a negotiated settlement to resolve their investigations."
Binance added in its response:
Any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong, and there is zero justification for the Staff's action in light of the ample time the Staff has had to conduct their investigation. All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure.
Now what
Being the largest crypto exchange in the world, any threat to Binance's future or ability to operate is going to be a big blow to the industry, especially with some analysts already worried about a liquidity crunch materializing in the second half of the year.
This news is particularly relevant to Coinbase, a large crypto exchange, which has already been warned by the SEC through a Wells notice that it may have violated U.S. securities laws through the company's spot market, staking services, prime brokerage, and crypto wallet.
Ultimately, I am not terribly interested in either Coinbase, Riot, or Shiba Inu right now. I tend to prefer larger, more established cryptocurrencies like Bitcoin, which I still believe is the best way to get some exposure to the sector.
