US SEC Crackdown on Binance – The Analysis 

Following the Securities and Exchange Commission's (SEC) recent lawsuits against Coinbase and Binance, two of the largest global crypto exchanges, other US crypto trading platforms may also find themselves under scrutiny. The SEC claimed this week that Coinbase violated regulations by trading a minimum of 13 crypto assets classified as securities without proper registration. Similarly, on Monday, the SEC accused Binance, the world's leading cryptocurrency exchange, of providing 12 unregistered cryptocurrency coins as securities. Let’s dig deeper into everything surrounding the news. 

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us sec crackdown on binance

Illustration: Lenka T

The lawsuit 

The legal actions broaden the total count of digital currencies that the SEC has explicitly classified as securities. This development brings up concerns regarding other platforms that have permitted US investors to trade these tokens, such as Kraken, Gemini,, and Okcoin, and if they could potentially face regulatory repercussions, according to industry leaders. Some platforms might consider de-listing the implicated tokens. 

“Every US exchange should now be aware that they could be exposed to enforcement measures if they have allowed, or continue to allow, the trading of these tokens,” stated Jason Allegrante, the chief legal and compliance officer at Fireblocks, a provider of digital asset infrastructure. 

A representative from Bitstamp, a cryptocurrency exchange, mentioned that the firm treats “all new regulatory developments with utmost importance” and is “presently assessing the fresh information released this week to decide on the appropriate steps to take.” 

Coinbase and Binance both refute the SEC’s claims and have committed to strongly defending themselves in court. The SEC chose not to comment. 

Initially, cryptocurrency firms operated in a regulatory gray zone, but under Gary Gensler’s leadership, the SEC has progressively claimed authority over the sector, asserting that the majority of tokens fit the description of a security and should adhere to the same stringent disclosure regulations. 

SEC and Binance – a deep relationship 

Prior to pursuing Binance, Gensler attempted to establish a close relationship with the firm, according to attorneys and as reported by The Wall Street Journal. The Journal’s sources, including internal Binance communications and an individual close to the SEC chair, indicated that Binance initiated contact with Gensler. 

In a recent legal document, Gibson and Latham lawyers state that Zhao maintained communication with Gensler following their March meeting. At Gensler’s request, Zhao participated in an interview for a cryptocurrency course Gensler was teaching at MIT. 

On Tuesday (June 6), the SEC referred to Zhao, who is believed to reside in the UAE, as a “foreign national” known for his “geographical evasiveness.” Zhao’s legal representatives now claim that he believed Gensler was willing to act as an informal advisor. 

In 2019, Gensler was scheduled to testify before the House Financial Services Committee and shared a draft of his planned testimony with Zhao in advance. That July, Gensler appeared before the House to discuss Facebook’s proposed but later abandoned cryptocurrency Libra and the intended Calibra wallet. 

Gensler’s prepared statement clarified that he does not offer advice to financial, technology, blockchain, or other companies and does not own any cryptocurrencies. 

How serious is the lawsuit? 

The announcement of SEC accusations led to a significant drop in Bitcoin’s value – the most prominent and frequently traded cryptocurrency – reaching its lowest level in nearly three months. 

Bitcoin’s price plunged nearly 25% within days when competing exchange FTX faced collapse last year. However, there is no indication that Binance is on the verge of a similar downfall – the firm has attempted to reassure its clients and prevent sudden withdrawals by stating that “all user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure.” 

Referred to as “CZ,” Zhao is a leading figure in the crypto industry, especially following the decline of his competitor, Bankman-Fried. Therefore, his downfall would certainly spell more doom for the crypto economy.  

Killing crypto 

The newest legal battles may take a long time to resolve in court, with some cases, such as the SEC’s lawsuit against Ripple’s XRP token, lasting over two years. 

Regardless of the outcome, these lawsuits demonstrate the SEC’s unwavering stance towards the crypto industry, as noted by industry executives. While larger crypto firms have the resources to challenge the SEC, smaller companies like Beaxy have gone bankrupt due to SEC enforcement actions. 

Ripple’s Chief Legal Officer, Stuart Alderoty, expressed at the Piper Sandler Global Exchange & Fintech Conference in New York that the SEC’s current leadership may not be concerned with winning or losing in court, but rather aims to dismantle the US crypto economy. 

SEC Chairman Gensler believes that a shake-up in the industry would benefit investors. He countered the idea that compliance for crypto intermediaries is unattainable in a recent speech, but acknowledged it requires effort. 

Analysts at Bernstein estimate that about 90% of crypto trading occurs outside the US, and executives predict that exchanges will continue to grow in areas with more favorable regulations. Coinbase, for instance, has considered relocating its global headquarters outside the US. 

Will Binance survive this? 

Thus, the concern arises if Binance can maintain its usual operations and if it can genuinely remain a viable entity in the long run. It’s a peculiar inquiry, considering the severity of the accusations in the SEC’s lawsuit. Apart from the typical “you lacked the necessary license to function, sir” criticisms that Coinbase also encounters, Binance and CZ face allegations of jeopardizing client funds, promoting or even enabling wash trading on Binance.US, inappropriately transferring customer funds without permission, and various other issues. 

In essence, Binance’s legal woes surpass those of Coinbase. The allegations not only address whether its listings constitute unregistered securities, but also whether it deceived customers about the use of their funds and if it implicitly urged US citizens to trade on a non-U.S.-based platform they should not have had access to. 

Binance’s reputation had already taken a hit. Two months ago, the US Commodities Futures Trading Commission (CFTC) filed a lawsuit against the exchange for inadequate licensing and offering improper financial products to US consumers. The suit revealed leaked documents and internal conversations that portrayed Binance as an occasionally clumsy organization and a ruthless competitor willing to endanger customer funds for growth. 

Industry experts are now seriously contemplating whether Binance will endure as a brand. Notably, the worst is yet to come. Binance is currently dealing with two civil lawsuits and pressure from the US Department of Justice (DOJ), which might initiate a criminal investigation that could potentially result in Binance executives serving time in prison. When CoinDesk inquired if the SEC’s lawsuit alone could lead to Binance’s closure, securities attorney and conceptual artist Brian Frye responded, “it’s a very real possibility.” 


In the end, the SEC crackdown on crypto may be the nail in the coffin for the entire industry. However, knowing the resiliency of crypto and the major players in it, we would argue that it will make the industry even stronger. With proper regulation in place, there is a possibility for more institutional investors to get involved, which would raise the price of BTC and ETH, for example, even further.  

For now, we advise a “wait and see” approach when it comes to buying or selling any crypto.   

Dino Kurbegović is a project coordinator and an investor and technology enthusiast with years of experience in managing complex projects. His journey into content writing began in 2014, covering finance, investing, crypto, technology and complex technical topics.