The acknowledgment came merely a year after Binance's launch, implying that the exchange may have been involved in questionable practices from an early stage.
That is why in June 2023, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit in Washington, D.C. against Binance, the leading cryptocurrency exchange, claiming it operated deceptively. The suit alleges that Binance's founder and Chief Executive Officer, Changpeng Zhao, and its former CCO misused customer accounts for personal benefit and avoided U.S. regulatory compliance.
The SEC alleges that Binance's establishment of a U.S. trading branch, intended for American users and U.S. compliance, was deceptive. The lawsuit suggests that Binance still permitted U.S. users to trade on less-regulated foreign exchanges, bypassing U.S. regulatory standards.
The consequences of the lawsuit have been significant. Binance has faced reduced access, being denied entry to certain markets, operational restrictions, and reluctance from governments and financial institutions to engage with the cryptocurrency exchange and its partners. These challenges have added to the uncertainty surrounding Binance's future.
Read more: Why Is Binance Being Sued? SEC Allegations Explained