Crypto Market Slumps as SEC Files Lawsuit Against Binance

Cryptocurrency prices experienced a significant decline on Monday following the US Securities and Exchange Commission’s (SEC) charges against Binance, the world’s largest crypto exchange, for violating securities laws.

Bitcoin, the leading cryptocurrency, fell by 5.5% to $25,662.50, marking its lowest level since March, as reported by Coin Metrics. Ether, the second-largest cryptocurrency, also slid by 5.1% to $1,807.79. Binance Coin, the digital token utilized for transaction and trading fees on the Binance exchange, experienced a significant decline, plummeting by 9.5%.

Binance, as the leading crypto exchange, had an expected market reaction to the news. Regulatory actions against major players like Binance create uncertainty and increase short-term market volatility. However, this volatility is usually temporary, and prices may recover once the news settles. Analyst Sam Callahan sees regulatory scrutiny as positive. It helps purge bad actors from the ecosystem and redirects capital to Bitcoin, which has fewer regulatory risks.

This lawsuit is part of a broader regulatory crackdown on the crypto industry by US regulators. The SEC has already charged Kraken, Genesis, and Gemini Trust for offering unregistered securities. While also cautioning Coinbase about potential securities charges.

Bitcoin’s performance in May was disappointing. It ended the month with a 7.9% decline, marking its worst month of trading since November. Throughout the month, Bitcoin remained within a narrow range of $26,000 to $28,000. Technical analysts are closely monitoring the $25,200 level as a key downside support level for Bitcoin.

Binance and SEC: Lawsuit Headache

The SEC’s allegations involve Binance and its co-founder, Changpeng Zhao, being accused of commingling billions of dollars of investor funds with their own and violating securities laws. This lawsuit follows a similar one brought against Binance by the Commodity Futures Trading Commission earlier this year.

The Securities and Exchange Commission (SEC) lodged a complaint in a federal court situated in Washington, D.C., outlining 13 allegations against Binance, along with its founder Changpeng Zhao and the operator of its supposedly autonomous US exchange.

The Securities and Exchange Commission has accused Binance of engaging in activities such as manipulating trading volumes, diverting customer funds, allowing unauthorized access to its platform by US customers, and disseminating misleading information about its market surveillance controls.

Furthermore, the SEC claims that Binance and Zhao secretly controlled customers’ assets, enabling them to blend and redirect investor funds as they wished.

The SEC’s complaint also asserts that Binance established separate entities in the US as part of an intricate scheme to circumvent US federal securities laws. These allegations echo practices previously exposed in investigative reports by Reuters in both 2021 and 2022.