US regulators are determining whether or not Binance broke securities laws during its startup years by selling tokens without registering them with the regulatory body first.
According to Bloomberg which cited people familiar with the matter, the SEC opened an investigation into the early origins of the BNB token (previously the Binance Coin), and if the exchange should have classified the initial 2017 offering as a security. A digital token may be subject to US securities laws if investors purchase the coin with intentions of making profits from the company’s funding or projects.
The SEC is also looking into potential trading abuses by Binance insiders, and if Binance.US— the US-based affiliate blockchain— is, in fact, a separate entity from its main counterpart. Another individual with knowledge of the SEC investigation said that regulators are also taking a closer look into the market-making companies related to Binance CEO Changpeng Zhao, and whether or not the companies used Binance.US to facilitate broker-dealer activities.
Binance, which does not have headquarters in a specific country but rather operates via affiliates in various regions around the globe, is already the subject of investigations by the Justice Department, the Commodity Futures Trading Commission, as well as the IRS. Although the conclusion of SEC’s investigation is still months away, the exchange could face similar repercussions as Ripple Labs Inc., which has been sued by regulators over allegedly breaking securities laws with the sale of its XRP token.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.