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Crypto Market Shaken as Binance Faces US Legal Action

Binance Faces US Legal Action

Cryptocurrencies experienced a widespread decline following the accusations made by the US Securities and Exchange Commission against Binance Holdings Ltd., accusing them of mishandling funds and providing false information to regulators.

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The SEC lawsuit also claimed that certain tokens, including Solana, Cardano, Polygon, Filecoin, Cosmos, Sandbox, Decentraland, Algorand, Axie Infinity, and COTI, which were traded on Binance.com and Binance.US, were offered and sold as securities. This development could have significant implications for other exchanges that offer these tokens. Consequently, Solana saw a drop of up to 13%, Cardano decreased by 8%, Polygon slipped by 6%, and Filecoin slumped by 10%.

Crypto Market Shaken

As a result of these events, Bitcoin also experienced a decline of up to 6.7% to $25,415, reaching its lowest point since April. The native token of Binance, Binance Coin, also dropped by as much as 13%. Bitcoin represents nearly 50% of the total value of the $1.2 trillion cryptocurrency market, as per data from CoinMarketCap. Meanwhile, Binance Coin holds the position of the fourth-largest token, with a market value of approximately $43 billion. It is worth noting that Binance handles about half of all cryptocurrency trading volume.

Binance Faces US Legal Action: Key Points

  • According to Coinglass, a tracker, approximately $250 million worth of trading positions were liquidated in the past four hours, primarily from traders who were speculating on higher prices.
  • These charges are the latest in a series of regulatory actions taken against Binance and its co-founder and CEO, Changpeng Zhao.
  • In March, the US Commodity Futures Trading Commission accused Binance and Zhao of consistently violating American derivatives regulations.
  • Furthermore, the US Justice Department has been investigating whether Binance was utilized unlawfully to help Russians evade US sanctions and transfer money, as reported by Bloomberg in May.
  • Austin Campbell, an adjunct professor at Columbia Business School, commented that these developments align with people’s existing expectations and could encourage the movement of assets offshore, leaving the US behind.
  • The Securities and Exchange Commission (SEC) filed a case in a US federal court on Monday, alleging that Binance violated investor protection regulations by operating unregistered exchanges, misrepresenting trading controls, and selling unregistered securities, among other violations.
  • Initially, Zhao seemed to downplay the allegations by tweeting about the number 4, which he has been using to refer to “FUD” (fear, uncertainty, and doubt).
  • This term describes the anxiety that can arise in the cryptocurrency market following a previous market decline and a series of corporate failures.

In response, Binance published a blog post stating that the SEC’s allegations should not warrant an enforcement action and that they intend to vigorously defend their platform.

Also Read: Germany’s Economic Downturn: Fourth Largest Global Economy Slips into Recession

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