In recent developments, cryptocurrency exchange Binance and its United States affiliate have encountered substantial outflows as investors withdraw approximately $1.43 billion worth of crypto assets. This comes in the wake of a lawsuit filed by the US Securities and Exchange Commission (SEC) against both crypto exchanges, alleging various violations. The legal action represents a significant step by the watchdog in its ongoing efforts to regulate the crypto industry.
The SEC’s Allegations and Binance’s Response
The SEC has accused Binance and its CEO, Changpeng “CZ” Zhao, along with the operator of Binance.US, of allegedly engaging in deceptive practices to circumvent US regulations. The charges include artificially inflating trading volumes, misusing customer funds, failing to limit the access of US customers, and misleading investors about market surveillance controls.
Following the allegations CZ took to social media platform Twitter, where he responded with a succinct message denoted by the number “4.” This particular number holds significance within the Binance community as it symbolizes the encouragement to disregard fear, uncertainty, and doubt (FUD).
Additionally, Binance published a blog post expressing its disappointment regarding the SEC’s choice to initiate a legal complaint. It emphasized the exchange’s ongoing cooperation with the SEC’s investigations, highlighting its proactive engagement in the process.
Impact on Binance and Binance.US
As a direct consequence of the SEC lawsuit, Binance witnessed a significant outflow of approximately $1.34 billion in crypto tokens on the Ethereum blockchain according to Reuters. Additionally, its US affiliate, Binance.US, experienced net outflows of $70.8 million.
All these withdrawal activities happened just 24 hours after the announcement. The numbers shown were based on data available from Nansen as of Wednesday, June 7, at around 3 PM (UTC).
These substantial withdrawals indicate the concerns raised among investors following the regulatory action against the popular exchange. The source said that it is yet to receive a response from Binance and Binance.US regarding its extra inquiries on the issue.
The news of the SEC lawsuit and the subsequent outflows have reverberated throughout the cryptocurrency market. Bitcoin, the leading digital currency, faced a decline of over 5%, its most substantial drop since April 19. However, it has since stabilized, currently showing a 3.85% increase, trading around $26,300.
Meanwhile, Binance’s native cryptocurrency, BNB, initially plummeted by 9.2% but has since rebounded slightly, gaining 1.63% and reaching a value of $282.19.
Continued Legal Challenges
The SEC’s legal action marks the most recent development in a string of legal hurdles encountered by Binance. Prior to this, in March, the exchange faced a lawsuit from the US Commodity Futures Trading Commission (CFTC) alleging the operation of an exchange deemed “illegal” and the existence of a compliance program characterized as a “sham.”
In response to the CFTC’s accusations, CZ issued a statement expressing his belief that the claims put forth by the commission presented an “incomplete recitation of facts.”
As a consequence of the SEC’s legal action against Binance and its U.S. counterpart, the exchanges have experienced significant capital outflows amounting to around $1.43 billion. The allegations outlined in the lawsuit have prompted apprehension among investors, leading to a depreciation in the value of Bitcoin and impacting Binance’s native digital currency, BNB.
While Binance prepares to defend its platform against the SEC’s charges, the cryptocurrency industry faces yet another regulatory blow. It remains to be seen how these legal challenges will shape the future of Binance and the broader crypto landscape.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager of a consultancy firm.