Topline
Shares in crypto and blockchain companies and the prices of major cryptocurrencies like bitcoin and ether have slumped after U.S. regulators accused the world’s largest crypto trading platform Binance and its founder of weaving an “extensive web of deception” and mishandling investors’ assets, the latest blow to the sector after a string of high-profile failures and crashes.
Key Facts
The price of bitcoin, by far the largest cryptocurrency by market capitalization, was trading at $25,710 early Tuesday morning, down about 4% from the day before.
Ether, second only to bitcoin in terms of market capitalization, was trading at nearly $1,816 on Tuesday, down almost 3% from the same time Monday.
The prices of other top tokens, many named as securities in the lawsuit, also plunged in the last 24 hours, including Ripple’s XRP, down around 5%, Cardano’s ada (6%), dogecoin (7%), Solana’s sol (7%) and Polygon’s Matic (7%).
The value of Binance’s own token, Binance Coin (BNB), which was also named in the lawsuit and has a market value of nearly $50 billion, is down about 8% from Monday.
Stock for many crypto and blockchain firms—the technology underpinning the digital currencies—also fell following news of the regulator’s crackdown.
Shares of Coinbase, the U.S.’ largest crypto exchange and one of Binance’s biggest rivals, were down around 9% at market close on Monday, as were shares for bitcoin mining firms Riot Platforms (9%) and Marathon Digital (8%).
News Peg
The Securities and Exchange Commission (SEC) on Monday sued Binance and its chief executive Changpeng Zhao for allegedly mishandling funds, lying to regulators and violating an array of securities laws. While this is not the first time Binance has faced regulatory scrutiny—the Commodity Futures Trading Commission sued the company for allegedly illegally serving U.S. clients in March—the SEC is a powerful regulator and its allegations are serious and have the potential to both cripple Binance’s U.S. operations and reshape the sector as a whole. The lawsuit comes as key financial regulators, including the SEC and CFTC, which usually cooperate on such cases, vie for supremacy in regulating crypto and pay increasingly close attention to the industry. It also follows a number of high profile failures, notably the collapse of Sam Bankman-Fried’s crypto exchange FTX and the failure of lenders Celsius and BlockFi.
Contra
Binance strongly disputes the allegations leveled against it and said it will “vigorously” defend itself, adding that it has actively cooperated with the SEC’s investigation and “worked hard to answer their questions and address their concerns.” Although stressing it is taking the “allegations seriously,” Binance said enforcement action was unwarranted and said it is “disheartened” by the regulator’s approach, alleging regulatory “overreach” that damages the U.S.’ status as a global financial hub. “It seems based on these developments that the SEC’s goal here was never to protect investors,” Binance wrote in a blog. “The SEC’s real intent here, instead, appears to be to make headlines.”
Forbes Valuation
$10.5 billion. That’s the estimated net worth of Changpeng Zhao, according to Forbes’ real time tracker, ranking him as the world’s 172nd richest person. Zhao, who goes by CZ, founded Binance in 2017 and his soaring wealth saw him rapidly climb the ranks of the world’s richest. His net worth, though still sizable, sank as the crypto market soured last year.
SEC Sues Binance For Multiple U.S. Rule Violations (Forbes)
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