Crypto Exchange Binance Faces Massive Withdrawals After SEC Lawsuit

News | June 6, 2023 By:

Binance, the world’s biggest crypto exchange, has experienced a huge outflow of crypto worth more than $1 billion in the last 24 hours, following a lawsuit filed by the US financial regulator against the company and its founder for violating securities laws.

According to data from Nansen, an analytics firm, Binance saw $1.6 billion in Ethereum leave its platform yesterday, while only $872 million came in. This is the largest net outflow in a single day since March when crypto traders were spooked by the threat of a banking crisis.

The Securities and Exchange Commission (SEC) accused Binance and its CEO Changpeng Zhao of operating unregulated crypto trading platforms in the US, offering unregistered crypto products, and putting investors’ assets at significant risk. The SEC also alleged that Binance and Zhao lied to regulators and investors about their risk controls, trading volumes, and operational independence.

“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.

Binance denied the allegations and said it works diligently to comply with laws and regulations applicable to its business.

The lawsuit adds to the regulatory pressure on Binance and the crypto sector in general. Earlier this year, the UK’s Financial Conduct Authority (FCA) banned Binance from conducting any regulated activity in the UK and warned consumers about the risks of crypto investments.

Binance has since tried to improve its relations with the FCA and other regulators but has also faced criticism from its co-founders.