CZ Not off the Hook Yet as SEC Continues to Investigate Binance US: Report

Last updated: December 18, 2023 23:31 EST
. 1 min read

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binance-ceo-cz — Source: Youtube/Entrepreneur ME

The United States Securities and Exchange Commission (SEC) is seeking evidence regarding Binance.US’s alleged backdoor control over customer assets, resembling a structure akin to FTX, Wall Street Journal reported.

In June, the SEC initiated legal action against Binance and its American counterpart, Binance.US, asserting their involvement in the sale of unregistered securities.

SEC Alleges Binance of Fraud

The SEC lawsuit accused Binance and its founder, Changpeng Zhao (CZ), of participating in a complex conspiracy involving fraud, conflicts of interest, lack of disclosure, and willful disregard for the law.

One specific allegation suggested that the exchange had discretionarily redirected customer assets, including funds sent to the Switzerland-based Sigma Chain under Zhao’s control.

During a recent federal court hearing on November 27, Binance.US attorneys argued that the SEC lacked evidence of asset misuse. They urged U.S. Magistrate Judge Zia Faruqui to consider halting the SEC’s investigation into potential fraud.

Binance.US attorney Matthew Laroche highlighted the soaring costs of the lawsuit, pointing out that Binance.US assets had plummeted nearly 90%, and its user base had halved since the SEC filed the initial lawsuit.

This development occurred alongside Binance and CZ’s agreement to plead guilty to violating U.S. anti-money laundering laws in a $4.3 billion settlement with the U.S. Justice Department, Treasury, and Commodity Futures Trading Commission (CFTC) the previous week.

DoJ’s Cases Does Not Include SEC Lawsuit

Judge Faruqui, overseeing the Binance and SEC case, expressed skepticism about the misappropriation of customer assets, citing the guilty pleas. He urged both parties to resolve the dispute, setting a deadline of December 15 for an update.

Simultaneously, CZ awaits a court review to determine if he can leave the U.S. and return two weeks before his scheduled sentencing date in February. The judge’s order restricts CZ from traveling to the United Arab Emirates, his primary base, until a court rules on a motion for review from the U.S. government.