SEC sued Binance and Zhao in sweeping 13-charge crypto case

On June 5, 2023, the U.S. Securities and Exchange Commission filed a civil complaint against Binance Holdings Limited, BAM Trading Services, BAM Management US Holdings and founder Changpeng Zhao in the U.S. District Court for the District of Columbia. The agency announced 13 charges spanning unregistered market functions, token offerings, platform controls and alleged investor deception.

The filing put the structure of the world’s largest crypto exchange by trading volume under direct U.S. securities-law challenge. It also widened the regulatory exposure beyond Binance itself: the complaint alleged that BNB, BUSD and 10 other named crypto assets were offered and sold as investment contracts, while attacking the exchange model that combined trading, brokerage and settlement-like functions without SEC registration.

The allegations were not judicial findings on June 5. Binance disputed them and said it would defend the case.

What the SEC alleged

The SEC said Binance.com and Binance.US performed exchange, broker-dealer and clearing-agency functions without the required registrations. It separately challenged offers and sales of BNB, BUSD, the Simple Earn and BNB Vault lending products, and Binance.US staking services.

The 136-page complaint went further than registration. It alleged that Zhao and Binance maintained substantial control over the U.S. platform despite public representations that Binance.US operated independently. According to the agency, controls intended to keep U.S. customers off Binance.com were circumvented for valuable accounts.

The SEC also alleged that BAM Trading and BAM Management misled customers and equity investors about market-surveillance controls. Sigma Chain, a trading firm owned by Zhao, allegedly conducted wash trading that inflated Binance.US volume. The complaint further alleged that Binance and Zhao could control customer assets, and that billions of dollars were commingled and transferred through Merit Peak, another Zhao-owned entity. Those were the regulator’s claims at filing, not established facts.

Why the case reached beyond one exchange

The complaint’s asset analysis named SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS and COTI as crypto assets the SEC alleged were offered and sold as securities. Together with BNB and BUSD, that made the case relevant to token issuers, other trading venues and U.S. customers holding assets that had not been treated as registered securities.

Institutionally, the action sought to apply the familiar separation and disclosure duties of securities markets to a vertically integrated crypto platform. The SEC’s theory was that combining order matching, customer intermediation, custody-related control and clearing functions created conflicts that registration rules were designed to expose and constrain. Binance’s position was the opposite: it said BNB and BUSD were not securities, its user assets were safe, and the SEC had abandoned negotiations in favor of litigation.

The dispute therefore concerned both conduct and jurisdiction. Even if readers set aside the most serious asset-control allegations, the registration claims posed a basic question for the U.S. industry: whether a large crypto venue could continue offering a broad set of services without entering the securities regulatory framework the SEC said applied.

The immediate market signal

A Reuters report updated at 6:46 p.m. Eastern on June 5 listed bitcoin down 5.45% and BNB down 9.72% after the filing, with bitcoin at its lowest level since mid-March. Reuters did not specify the trading venue, base currency, exact snapshot time or comparison interval for those percentages. They are therefore useful as contemporaneous directional evidence, not as official daily closes or proof that the lawsuit alone caused every move.

The defensible event-day conclusion was narrower. A federal regulator had opened a major civil case against Binance, Zhao and the operators of Binance.US, and had used that case to challenge both platform practices and the legal status of a dozen named assets. The litigation’s outcome remained unknown on June 5, but the filing itself immediately increased legal and market-structure risk across the U.S. digital-asset sector.