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US SEC sues world’s largest crypto exchange Binance and founder

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SEC says Binance and its CEO secretly control customers’ assets, allowing them to commingle and divert customer funds.

The United States Securities and Exchange Commission (SEC) has sued the world’s largest cryptocurrency exchange, Binance, and its CEO and founder, Changpeng Zhao, for allegedly failing to restrict US customers from its platform and misleading investors about its market surveillance controls as well as for operating an unregistered securities exchange.

The SEC’s complaint, filed on Monday in federal court in Washington, DC, also accused Binance and Zhao of secretly controlling customers’ assets, allowing them to commingle and divert customer funds, “as they please”.

Binance created separate US entities “as part of an elaborate scheme to evade US federal securities laws”, the SEC also alleged.

From almost three years ago until June 2022, a trading firm owned and controlled by Zhao, Sigma Chain, engaged in so-called wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US platform, the SEC also alleged.

“We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” said SEC Chair Gary Gensler said in a statement.

In a blog post, Binance said: “We intend to defend our platform vigorously,” adding that “because Binance is not a US exchange, the SEC’s actions are limited in reach.”

“Any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong,” the blog post said.

Binance.US, which is ultimately controlled by Zhao, said in a tweet that the lawsuit was “unjustified by the facts, by the law, or by the Commission’s own precedent.”

Bitcoin, the world’s biggest cryptocurrency, fell as much as 6 percent on the news to its lowest in almost three months. Binance’s own cryptocurrency BNB, the world’s fourth-largest by market size, dropped more than 5 percent.

‘Big risk’

The move is the latest in a series of legal woes for Binance, which was also sued by the US Commodity Futures Trading Commission in March for operating what the regulator alleged were an “illegal” exchange and a “sham” compliance programme. Zhao called those charges “disappointing” and an “incomplete recitation of facts”.

Binance is also under investigation by the US Department of Justice for suspected money laundering and sanctions violations, according to people familiar with the probe.

Market players said the SEC’s allegations could hobble Binance, with the lawsuit likely to reverberate through the crypto industry. Binance dominates crypto trading, last year processing trades worth about $65bn a day with up to 70 percent of the market.

“I think that there’s a big risk here that this could be crippling to Binance,” said Ed Moya, senior market analyst at Oanda.

Binance was founded in Shanghai in 2017 by Zhao, a Canadian citizen born and raised until the age of 12 in China.

While its holding company is based in the Cayman Islands, Binance says it does not have a headquarters and has declined to state the location of its main Binance.com exchange.

The firm has processed at least $10bn in payments for criminals and companies seeking to evade US sanctions, the Reuters news agency has previously reported.

Reuters also reported on May 23 that Binance commingled its customers’ funds with its corporate revenues in a Silvergate Bank account belonging to trading firm Merit Peak in breach of US financial rules that require client money to be kept separate.

Binance denied mixing customer deposits and company funds, saying that users who sent money to the account were not making deposits but rather buying Binance’s bespoke dollar-linked crypto token.

 

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

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CPC Practice Exam

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