The United States Securities and Exchange Commission (SEC) is investigating whether Binance Holdings violated securities regulations when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported June 6.
Binance is the largest cryptocurrency exchange in the world, and BNB is the fifth largest cryptocurrency by market capitalization.
The BNB ICO took place in July 2017 on various platforms, during the height of the so-called ICO boom, with the Binance exchange opening just a few days later. According to Bloomberg, citing unidentified people familiar with the matter, at least one US resident claimed to have participated in the ICO, which could be a crucial development for an SEC case, should the agency decide to pursue one. The SEC has claimed that most cryptocurrencies are securities and has filed cases against several ICO projects.
The founder and CEO of Binance, Changpeng Zhao, often known as CZ, said in a 2020 blog that the wording of the BNB white paper was changed in January 2019 because “the potential to be misconstrued as a security is higher in certain regions.” Binance’s US arm, Binance.US, was created later that year.
Also on May 6, Reuters published a lengthy special report alleging that Binance processed at least $2.35 billion in transactions stemming from hacks, investment fraud, and narcotics sales between 2017 and 2021, and that it had weak KYC/AML protections for those years.
Among other cases, Reuters mentions the Eterbase hack, with part of the proceeds laundered through Binance by North Korean hacker group Lazarus, and Binance’s partnership with Russian drug market Hydra.
A Binance spokesperson refuted the Reuters findings, with the exchange telling Forbes in a statement that the note is a “woefully uninformed opinion piece using outdated information from 2019 and unverified personal statements.”
Binance is already the subject of several federal investigations in the United States, including another investigation by the SEC. The US Commodity Futures Trading Commission (CFTC) launched an investigation into the exchange’s trading practices last year.
Binance Markets, its UK branch, was ordered by the Financial Conduct Authority (FCA) to cease activities in the UK following a review of its operations last year. Also, in June of last year Binance ordered to cease operations in Ontario, although it remained active in the Canadian province until March of this year.
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