SEC begins investigation on Binance native token BNB
The SEC shows no signs of slowing down when it comes to investigating cryptocurrency exchanges. The latest target is Binance, one of the world’s largest cryptocurrency exchanges.
The U.S. Securities and Exchange Commission (SEC) has begun an investigation into Binance, according to a report from Bloomberg. The SEC is reportedly looking into whether or not Binance allowed trading of digital tokens that should have been registered as securities.
- One of the largest cryptocurrency exchanges in the world, Binance is being investigated by the SEC regarding BNB, the exchange’s native token.
- According to Bloomberg, the US Securities and Exchange Commission is looking into whether Binance Holdings broke securities laws when it launched its BNB token in an initial coin offering (ICO) five years ago.
Binance is the largest cryptocurrency exchange in the world, and BNB is the fifth most valuable cryptocurrency.
At the height of the so-called ICO boom, the Binance ICO took place in July 2017 on several platforms, and the Binance exchange launched just days later.
According to Bloomberg, which cited anonymous sources familiar with the situation, at least one US resident claimed to have participated in the ICO, which could be a key fact in an SEC case if the agency decides to pursue one. The Securities and Exchange Commission (SEC) has declared most cryptocurrencies to be securities and has filed lawsuits against them.
“As the industry has grown at a rapid pace, we have been working very diligently to educate and assist law enforcement and regulators in the United States and around the world, while also adhering to new guidelines,” a Binance spokesperson said in response to the new investigation. “We will continue to meet all regulatory requirements.”
Binance founder and CEO Changpeng Zhao, also known as “CZ,” stated in a 2020 blog post that the BNB white paper’s wording was changed in January 2019 because “the potential for being misunderstood as a security is higher in certain regions.” Binance.US, the company’s American subsidiary, was established later that year.
Also on May 6, Reuters published a lengthy special report alleging that between 2017 and 2021, Binance processed at least $2.35 billion in transactions involving hacks, investment fraud, and narcotics sales, and had lax Know Your Customer (KYC) and Anti-Money Laundering (AML) protections.
Reuters mentions the Eterbase hack, with some of the proceeds laundered through Binance by North Korean hacker group Lazarus, as well as Binance’s association with Russian-language drug mart Hydra.
A spokesperson for Binance disputed Reuters’ findings, and the exchange said in a statement to Forbes that the report is a “woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations.”
Binance is already the subject of several federal investigations in the United States, including another SEC investigation.
Last year, the Commodity Futures Trading Commission launched an investigation into the exchange’s trading practices. Following a review of its operations last year, the Financial Conduct Authority ordered Binance Markets, its United Kingdom branch, to cease operations in that country.
One of the SEC’s main concerns, according to the report, is whether Binance.US is truly independent of the global exchange and whether employees are involved in insider trading.
Furthermore, Binance was ordered to cease operations in Ontario in June of last year, despite remaining active in the Canadian province until March of this year.
The price of BNB could drop by 40% as the SEC investigates Binance
According to a recent Reuter report, Binance laundered “at least $2.35 billion in illicit funds,” putting BNB at risk.
The price of Binance Coin (BNB) dropped nearly 7.3 percent on June 7 to below $275, its lowest level in three weeks, as the Securities and Exchange Commission (SEC) launched an investigation into the company.
Furthermore, as its parent company, Binance, is accused of violating securities laws and laundering billions of dollars in illicit funds for criminals, the price of BNB could fall another 25%–40% in 2022.
Binance launched BNB in 2017 as part of an initial coin offering (ICO) that raised $15 million for the company.
Within the Binance ecosystem, the token primarily functions as a utility asset, allowing traders to earn discounts on their trading activities. BNB is also used as a speculative financial asset, and it is the fifth-largest cryptocurrency in terms of market capitalization.
According to sources contacted by Bloomberg, the Securities and Exchange Commission (SEC) is investigating whether the 2017 ICO of BNB tokens was a sale of securities that should have been registered with the regulator.
This could put downward pressure on the price of BNB, which has already lost more than half of its value since peaking in May 2021 at around $700.
With these latest actions from the SEC and continued battle with Ripple, it is clear they have no intention on backing down from trying to regulate the industry.