Bad day for Binance with SEC probe and Reuters exposure

The U.S. Securities and Exchange Commission is investigating whether Binance violated securities rules when it launched its BNB token in an initial coin offering (ICO) five years ago, Bloomberg reported on Monday.

Binance is the largest cryptocurrency exchange in the world and BNB is the fifth largest cryptocurrency.

The BNB ICO took place on multiple platforms in July 2017 at the height of the ICO craze, with the Binance exchange opening a few days later. According to Bloomberg, citing unnamed people familiar with the matter, at least one U.S. resident claimed to have participated in the ICO, which could be a crucial fact if the SEC chooses to pursue it. The SEC has claimed that most cryptocurrencies are securities and has filed lawsuits against some ICO projects.

In a 2020 blog post, Binance founder and CEO Changpeng Zhao (commonly referred to as "CZ") stated that the wording of the BNB white paper was changed in January 2019 because it was "misunderstood in some regions as Securities are more likely.” Binance’s U.S. offshoot, Binance.US, launched later that year.

Also on May 6, Reuters published a lengthy special report stating that Binance handled at least $2.35 billion in hacking, investment fraud, and drug sales between 2017 and 2021, and that “Knowing You” over the years Know Your Customer” (KYC) and Anti-Money Laundering (AML) protections are weak.

Among other cases, Reuters cited the hack of Eterbase, some of the proceeds of which were laundered through Binance by the North Korean hacking group Lazarus, and Binance’s links to Russian-language drug marketplace Hydra.

A spokesperson for Binance disputed the Reuters findings, with the exchange telling Forbes in a statement that the report was a "grossly misleading column using outdated 2019 information and unverified personal testimonials." article".

Binance has already been the subject of federal investigations in the United States, including another investigation by the Securities and Exchange Commission. The U.S. Commodity Futures Trading Commission began an investigation into the trading practices of the Binance exchange last year.

Last year, the UK’s Financial Conduct Authority ordered its UK arm, Binance Markets, to cease activity in the UK. Additionally, last June, Binance was ordered to cease operations in Ontario, even though it had been active in Ontario, Canada until March of this year.