In a significant turn of events, Binance and CEO Changpeng Zhao are under scrutiny from the SEC, which has filed a lawsuit that is causing waves in the crypto sector.

The U.S. Securities and Exchange Commission has filed a lawsuit against Binance and its CEO, Changpeng Zhao, for claims of breaching U.S. securities laws.

In the complaint The SEC's lawsuit, filed in a federal court on Monday, accuses Binance and Zhao of breaching federal securities legislation while allegedly reaping billions of dollars in profits for themselves.

The allegations state that Binance.com and Binance.US were involved in offering unregistered trading platforms for crypto asset securities, in addition to partaking in various unregistered sales and investment schemes.

Moreover, the lawsuit asserts that Zhao engaged in activities that combined the roles of exchange, broker-dealer, and clearinghouse through the Binance platforms, all without the necessary registration with the SEC, despite his knowledge of this requirement.

"The defendants have deliberately attempted to bypass U.S. regulatory scrutiny while simultaneously providing services related to securities to U.S. customers. This action has jeopardized billions of dollars belonging to investors and put their capital at the discretion of Binance and Zhao. Devoid of regulatory oversight, the defendants could and did handle investors' cryptocurrencies and fiat currencies in ways that properly registered entities would not have been allowed to. For instance, massive sums of customer funds from both Binance platforms were pooled in an account controlled by a Zhao-affiliated entity (Merit Peak Limited), which subsequently transferred these funds to a third party, apparently linked to the trading of crypto assets,\" the lawsuit detailed.

In a statement regarding the lawsuit, SEC Chair Gary Gensler commented:

"With thirteen distinct allegations, we assert that Zhao and Binance have engaged in a far-reaching scheme of deceit, conflicts of interest, inadequate disclosure, and calculated evasion of legal responsibilities.\"

The SEC's recent lawsuit against Binance and Zhao follows previous legal actions by the U.S. Commodity Futures Trading Commission (CFTC), which also accused them of dealing in unregistered crypto derivatives and echoed many of the concerns raised in the SEC case.

In response to the news, Zhao tweeted As of 11:27 AM ET, Binance stated: \"Our team is on standby to ensure that our systems are functioning smoothly, particularly regarding deposits and withdrawals. We will respond to the complaint once we receive it, as we have not seen it yet. It seems the media is getting information before us.\"

Following the news of the lawsuit, the cryptocurrency market has taken a downturn, with Bitcoin plummeting by 5% to $25,827.05, and Ethereum dropping 4.45% to $1,814.10 at the time of writing. Additionally, the memecoin Pepe saw a decline of 14%, while SUI, the native token for the Sui blockchain, fell by 16%.

As reported by the blockchain analytics firm Nansen, Binance has experienced a substantial outflow of around $69 million within just the last hour. Coindesk Changpeng Zhao, the Founder and CEO of Binance

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