In a federal court case filed on Monday, the Securities and Exchange Commission accused Binance, the world’s largest cryptocurrency exchange, of mishandling customer funds and deceiving regulators and investors about its practices. The S.E.C. alleged that Binance mixed billions of dollars in customer funds and covertly sent them to a separate firm controlled by its founder, Changpeng Zhao. The case further alleged that Binance misled investors about the effectiveness of its systems to detect and manage manipulative trading and about the measures it took to discourage U.S. investors from utilizing its unregulated platform. The regulators believe that Binance and Zhao made billions, putting their customers’ assets at considerable risk. In their pursuit to bring an industry based on an explicitly anti-government ethos under control, regulators have considered Binance a significant target for a long time. In its court filing, the S.E.C. cited a 2018 email from Binance’s chief compliance officer stating that they never wanted Binance.com to be regulated. The charges are the latest attempts by U.S. regulators and prosecutors to curb the Wild West of crypto trading and compel major players in this area to comply with U.S. laws. Binance, the largest crypto exchange, is already under increasing pressure as the Justice Department investigates it for money-laundering violations, its external auditing firm deserted it last year, and its hold on the cryptocurrency market has dwindled. To improve its reputation, Binance has employed several new compliance officials, including a former federal prosecutor who leads its compliance operation.
