Binance founder and CEO Changpeng Zhao has been squarely in the crosshairs of U.S. regulators, … [+]
In the largest crackdown to date by U.S. regulators against the crypto industry, the Securities and Exchange Commission (SEC) announced this week it’s launching two separate civil suits against Binance and Coinbase
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While the civil suits collectively indicate the SEC is ready to take a firm stance on how crypto is regulated, the suits themselves vary greatly in substance and language—indicating regulators view the two companies’s intentions (and thus potentially consequences) very differently.
Both Binance and Coinbase are being charged for operating as unregistered securities exchanges, brokers and clearing houses. However Binance, (and its founder Changpeng Zhao) is also being charged with a host of more serious charges, including lying about serving U.S-based-customers, misleading investors about anti-manipulation measures of the platform, and most seriously, mixing billions of customer dollars from Binance with those of Merit Peak Limited, a separate company owned by Zhao. Coinbase is also facing a separate charge for operating unregistered sales of securities in connection with its staking-as-a-service program.
Beyond the quantity and seriousness of the individual charges, the suits vary greatly in the alleged malintent of each company. The SEC in no subtle terms indicates that it views Binance as a bad actor—accusing Binance of “a blatant disregard of the federal securities laws” and “a multi-step plan to surreptitiously evade U.S. laws.”
Text from SEC Civil Action No. 1:23-cv-01599 against Binance levies a host of allegations into not … [+]
By comparison, the language against Coinbase feels very benign simply stating, “Coinbase’s failure to register has deprived investors of significant protections.” The SEC does accuse Coinbase of deliberately refusing to follow SEC regulation, however it characterizes this as a calculated protest of the laws, rather than a repeated attempt to deceive the commission as a governing body.
“It’s worth comparing the Binance and Coinbase complaints.” says Hermine Wong, former SEC regulator and previous Head of Policy at Coinbase. “The Binance complaint reads like a soap opera of crypto personalities and stolen customer funds. The Coinbase complaint is an impersonal, milquetoast recitation of securities laws…It gives you a sense of the agency’s strategy.”
The differing attitudes from the SEC shouldn’t be surprising to anyone who’s followed the commission’s mounting legal battles with crypto companies. Coinbase, the only publicly listed crypto exchange, has prided itself on being regulation compliant—with a strategy of being a first mover as regulators seek to work with established “friendly” crypto companies. Binance on the other hand, has taken a deliberately antagonist approach to regulators, with the Binance Chief Compliance Officer previously stating “we do not want [Binance].com to be regulated ever.”
Binance’s reputation extends beyond disagreements with the SEC, with even the Commodity Futures Trading Commission (considered to be a more crypto-friendly body by many) levying several charges against Binance and expressing a desire to ban Zhao from commodities trading for life.
By announcing suits against the two exchanges within days of each other the SEC is making clear its confirmation that all crypto tokens minus Bitcoin
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Both companies have responded with measured disappointment to the SEC’s decision, with Coinbase CEO Brian Armstrong tweeting that “Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America.”
Binance’s CEO Changpeng Zhao responded in his characteristically shorthand, anti-establishment manner, tweeting on June 6th, “If you have to pick a fight with everyone, maybe you are the one at fault.”
Zhao also retweeted several followers accusing the SEC of bias against Binance but not FTX, and in response to a Tweet by SEC Chair Gary Gensler, commented “Wonder if he ever reads the comments under his post, from the consumers he is suppose to protect.”
Representatives from Coinbase and Binance responded but were unable to provide any new commentary for this piece. Representatives from the SEC were contacted without response.
