Binance under dark clouds

min read by
Nicolas T.

The SEC has revealed a whole list of shitcoins that Binance should have registered as “securities”. And ethereum? What about wash trading?

ETH spared by the SEC?

The SEC has filed a complaint against Binance and its American subsidiary (BAM Trading Services) which manages the Binance.US exchange.

Binance is notably accused of having proposed to its customers to invest in « securities » not registered with the SEC.

“We’re operating like a p… unregulated securities exchange my man. – Head of Compliance at Binance, 2018

Since its launch, Binance US has enabled the trading of securities unregistered which include, « not limited to, BNB, BUSD, SOL, ADA, MATIC, WIRE, ATOM, SAND, MANA, ALGO, AXS and COTI”.

The SEC did not dare to name ETH. Its president Gary Gensler probably played it safe after recently discovering that the organizations behind ethereum are well established on the side of the US Congress.

These organizations include Consensys, the Ethereum Foundation, and the Enterprise Ethereum Alliance. But also Coinbase, which is currently collecting hundreds of millions of dollars thanks to its “staking” offer on ETH. Not to mention crypto VC companies like Andreessen Horowitz.

As a reminder, ConsenSys owns the company Infura which manages MetaMask, the Ethereum wallet. Infura made headlines a few months ago for its collection of IP addresses and Metamask wallet addresses.

The Enterprise Ethereum Alliance is an organization lobbying for the benefit of ETH. There are giants like Accenture, which has a foothold in almost all CBDC projects. But also Banco Santander, JP Morgan or even Microsoft…

This faction has been spending a lot of money in Washington for years. Its objective is to prevent Ethereum from being labeled “security”. It is clearly a question of offering it the same status of “commodity” as Bitcoin.

Le staking d’Achille

Since the famous “merge” of September 15, Ethereum has changed its consensus mechanism, moving from Proof-of-Work to Proof-of-Stake. Rather than providing energy, it is now “sufficient” to deposit 32 ETH to participate in the transaction validation process.

Few people own 32 ETH. So much so that companies like Lido or Coinbase allow their customers to pool their ETH. This is the famous “staking” service. Kraken recently terminated this service under pressure from the SEC.

So even though ETH is not specifically named in the SEC’s complaint, staking is still considered to fall under securities law.

In other words, big black clouds are gathering over Binance and hefty fines should be coming soon.

Binance customers are not mistaken and are withdrawing their funds at the fastest rate since the US banking crisis in March. According to Coinglass, more than 13,300 BTC have been withdrawn in the last 24 hours. More than 30,000 BTC over a month. The exchange is already experiencing net outflows in excess of $1.5 billion according to Blockwork.

Knowing that many people have been complaining since yesterday about having to re-verify their identity by submitting new documents. Or how to stop the bleeding…

According to DeFiLlama, Binance’s assets still stand at $60.5 billion.

Binance’s response

Binance responded in this statement. Far from making amends, the exchange continues to pretend not to understand the law:

“While we take the SEC’s allegations seriously, they should not be the subject of a complaint. […] Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide the digital asset industry with much-needed clarity and guidance. »

Binance se dit ” surprised “ and warns that “SEC actions undermine America’s role as a global hub for innovation and financial leadership”.

But is a shitcoin casino really an innovation?

The truth is that the demand for shitcoins is non-existent. The SEC accuses Binance of engaging in « wash trading » of shitcoins. In particular via the “market maker” Sigma Chaina company controlled by CZ.

Wash trading involves buying and selling a security for the express purpose of luring investors into believing that trading volumes are higher than they actually are.

“Zhao’s control over BAM Trading and Sigma Chain enabled the latter to carry out market manipulation operations on BinanceUS. […] From June to August 2021, Sigma Chain engaged in wash trading multiple times on 51 crypto-assets out of the 58 crypto-assets available on BinanceUS. “, can we read in the complaint of the SEC.

If there was a real demand for shitcoins, such illegal practices would not be necessary.

Without wash trading, there would be no shitcoin traders and most of the casino’s revenue would disappear.

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Nicolas T.

Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic, and libertarian prisms.


The comments and opinions expressed in this article are the sole responsibility of their author, and should not be considered as investment advice. Do your own research before making any investment decision.

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