Attorney and Cryptolaw founder John Deaton suggests DOJ might be preparing to file criminal charges against Binance and/or CEO Changpeng Zhao – ‘CZ’. CZ is being questioned by the SEC as the head of Binance, BAM, and Binance.US, by proxy.
In a tweet posted by John Deaton, attorney, and Cryptolaw founder, he states that signs point towards the DOJ preparing to file criminal charges against Binance and founder Changpeng Zhao. The US Securities and Exchange Commission has already filed 13 lawsuits against Binance and CZ. Among the allegations filed by the SEC are commingling customer funds and corporate funds, artificially inflating trade volumes, evading US regulators, and wash trading.
There have been rumors or reports that the DOJ may file criminal charges against @binance and/or @cz_binance . Because of the filing of this injunction – at this point in time – I suspect the DOJ will file criminal charges. I’m not suggesting that the DOJ should file charges or… https://t.co/dthKMRL7mk
— John E Deaton (@JohnEDeaton1) June 7, 2023
CZ founded Binance.US under the supervision of its operation agent, BAM Trading, of which he is also in control. Binance.US was created to operate independently to serve US customers under US regulations. However, investigations claim that CZ and associates transferred funds from Binance.US to accounts held by Binance and CZ, effectively avoiding US regulators.
The SEC, under the leadership of Chair Gary Gensler, filed lawsuits against Binance and CZ on June 5th, causing a ripple effect on the market. Several key cryptocurrencies have taken a hit, including Bitcoin and Binance’s own token, BNB. The SEC has also requested the US federal government to freeze all Binance.US funds around the world, citing the importance of maintaining the integrity of the investigation by preventing Binance.US and CZ from removing any key evidence.
As Binance.US was created to operate independently from its mother company, its funds, along with its customer funds should only be managed by Binance.US staff. However, investigations claim that was not the case. Investigations allege that Guangying Chen, a senior Binance executive, and close associate of Changpeng Zhao had access to 5 bank accounts, including one holding Binance.US customer funds. Among the allegations was that Binance.US customer funds were commingled with funds in another account holding corporate accounts, with CZ’s knowledge.
Simultaneously, the SEC filed lawsuits against Binance’s direct competitor, Coinbase. SEC’s allegations claim that Coinbase operates as an unregistered trader while listing 13 registered securities on its platform. News of the lawsuit comes shortly after the second anniversary of Coinbase’s IPO being approved by the SEC.
The legal turmoil caused by lawsuits against both major crypto exchanges sends ripples into the trading market. Margins claim shares dropped 22% in premarket trading on Tuesday the 6th. While Coinbase stock has already decreased by 9% on Monday.
Deaton, Cryptolaw’s founder claims that “Gensler has ruthless ambition. The criminal charges will also fit this Administration’s narrative against crypto. Bitcoin, Crypto, and this administration’s war against innovation will be [sic] a big deal in the 2024 election.” While crypto exchanges in question claim that the SEC is pushing for stricter government oversight on an otherwise decentralized market.
Binance’s case may prove lengthy due to the sheer number of lawsuits and the vast amount of details involved. It would be no surprise if the SEC calls for the interrogation of different entities involved in the Binance case. Among the most notable names would be Silvergate Bank, a financial entity in charge of the aforementioned five bank accounts, Merit Peak Limited, a company used to control said accounts, and Sigma Chain, a company used to receive the funds from Binance.US through Silvergate Bank.
The SEC seems adamant about reshaping the scene of crypto trading and the entities in charge. When addressing the Coinbase case, Gary Gensler tweeted “Coinbase’s alleged failures deprive investors of critical protections, including rulebooks that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC.”