The process reportedly focuses on whether Binance offered digital assets to investors to finance a company with the promise of future profit. The IRS and CFTC are also investigating Binance, as they suspect that the exchange allowed trading cryptocurrencies without any regulation.
US regulators scrutinize the initial coin offering (ICO) that fueled the launch of cryptocurrency exchange Binance in 2017. The Securities and Exchange Commission (SEC) is investigating the origins of Binance Coin (BNB) for alleged violations of securities regulations.
A previous unrelated investigation indicates that there was laundering of at least USD 2.35 billion in illicit funds on Binance between 2017 and 2021.
Nobody is sure what prompted the SEC to conduct this latest investigation. However, BNB occupies 5th place in the cryptocurrency ranking, with a market capitalization of USD 47.59 billion.
The SEC investigation reportedly focuses on whether digital assets qualify as currencies and whether Binance offered them with the promise of future profit.
The creation of BNB as an ERC-20 token occurred on the Ethereum network in July 2017 before moving to a separate Binance blockchain. The initial coin offering of 100 million BNB at 15 US cents per unit raised USD 15 million.
Global Regulators Are Scrutinizing the Binance Crypto Exchange
Binance might be facing multiple investigations in Washington, of which the SEC is taking dozens of ICO investigative actions.
The exchange stated they could not comment on their discussions with regulators on education, assistance, and requests for information. They said that they would comply with all the requirements established by the law.
A USD 5 million class-action lawsuit hit Binance in March, leading several investors to claim that the exchange had sold them unlicensed securities.
The Internal Revenue Service (IRS) and the Commodity Futures Trading Commission (CFTC) also investigate Binance. They suspect that the exchange allowed US residents to trade cryptocurrencies without regulation through its platform.
Binance Became a Hub for Hackers, according to Reuters
Reuters recently released a report accusing Binance of processing at least USD 2.35 billion stemming from hacks, fraud, scams, and drug sales between 2017 and 2021. In addition, the news agency highlighted that Binance had weak KYC/AML protections during that period.
They also mentioned the Eterbase hack, as the North Korean hacker group Lazarus laundered much of the assets through Binance. Besides, Reuters also accused Binance of having ties to the Russian drug market Hydra.
According to Reuters, traders from the largest dark web drug market made and received crypto payments for USD 780 million through Binance.
The Finiko Ponzi scheme is another case that Reuters highlighted, as Binance allegedly received another USD 838 million.
However, Binance rejected the allegations of the news agency, saying that the report was an ill-informed opinion article. The exchange said they used outdated information from 2019 and unverified personal testimonies.
The report shows that the implementation of the KYC protocol stopped the use of Binance as a tool to process illicit funds. However, Reuters pointed out that at least USD 2.35 billion had already passed through the exchange from black markets, hacks, and other scams.
By Alexander Salazar
