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SEC Continues Hunt for Binance.US Fraud Evidence Amidst CZ’s Guilty Plea

The SEC presses on with its investigation into alleged Binance.US asset manipulation, even after the cryptocurrency major's $4.3 billion settlement and admission of guilt over AML violations by founder Changpeng Zhao (CZ).

The Securities and Exchange Commission (SEC) of the United States is leaving no stone unturned in its pursuit of evidence pointing to potential fraud by Binance.US, akin to the FTX-style backdoor asset control allegations, according to a report by the Wall Street Journal. This comes in the wake of charges brought against Binance and its former CEO, Changpeng Zhao (CZ), by the Department of Justice (DOJ), to which he pleaded guilty.

In June, the SEC took legal action against Binance and its U.S. branch, Binance.US, claiming involvement in the sale of unregistered securities. It fired accusations at Binance and CZ of partaking in a complex conspiracy that included fraud, conflicts of interest, a lack of disclosure, and a blatant disregard for the law. Central to this case was the assertion that the crypto exchange had the power to freely manipulate customer assets, including transferring funds to the Switzerland-based Sigma Chain, allegedly under CZ’s control.

During a recent hearing in federal court, Binance.US’s attorneys, led by Matthew Laroche, argued that the securities regulator lacked evidence of asset misuse. They urged U.S. Magistrate Judge Zia Faruqui to consider halting the SEC’s ongoing fraud investigation. Laroche cited the lawsuit’s escalating costs, noting that Binance.US’s assets had dipped by almost 90%, and its user base had shrunk by half since the SEC launched the lawsuit.

In a notable development, Binance and CZ agreed to plead guilty to violating U.S. anti-money laundering laws and settled with the U.S. Justice Department, Treasury, and Commodity Futures Trading Commission (CFTC) for a whopping $4.3 billion. However, the Justice Department’s case didn’t include any of the SEC’s fraud-related allegations stemming from its lawsuit with the crypto exchange in June.

Judge Faruqui, who is presiding over the Binance and SEC case, indicated that the guilty pleas make it less likely for Binance.US and CZ to have misused customer assets. “At some point, I have to make a leap of faith and say enough is enough,” he reportedly told the SEC’s lawyers. He has asked Binance.US and the SEC to find common ground and update him by Dec. 15.

Meanwhile, CZ is awaiting a court review to determine if he can now leave the U.S. and return two weeks before his sentencing date, scheduled for February. The judge decreed that CZ cannot leave for the United Arab Emirates until a court decision on a motion for review from the U.S. government.

As the SEC lawsuit gains momentum, the commission hopes to uncover more evidence of alleged fraud at Binance.US, mirroring FTX’s case. The SEC’s lawsuit has hinted at the possibility of Binance following FTX’s fraudulent path, but concrete proof remains elusive. However, the SEC is counting on the DOJ’s investigation into Binance and its charges to shed more light on their probe.


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