Abuse of customer funds, fraudulent transactions, etc! Coin An and Zhao Changpeng are sued by the US SEC, Bitcoin crashes, and 110000 people sell out digital currency in a day

On Monday local time, Jin'an, the world's largest cryptocurrency exchange, and its CEO Zhao Changpeng were accused of violating the regulations of the US security.

According to court documents submitted by the US Securities and Exchange Commission (SEC), the SEC accuses Coin An of misleading investors in trading controls, exaggerating trading volume, and transferring customer funds. Even mixing billions of dollars of currency security client funds into accounts held by entities controlled by Zhao Changpeng violates US law.

The indictment also mentions that since its establishment, under the guidance and control of its founder Zhao Changpeng, the Coin On Exchange has worked "first publicly, then secretly" to attract American customers. Then, they use the market makers they control to push up the price of encrypted assets and profit from customers.

In response to this, the United States responded that the SEC's allegations are baseless and intends to actively seek self-defense. In the past two and a half years, Coin An has been sincerely cooperating with the SEC in various ways and has engaged in extensive goodwill discussions with the SEC to reach an agreement and resolve the SEC's investigation.

After the media exposed the relevant news, Zhao Changpeng responded on social media that our team is always ready to ensure the stability of our system, including withdrawals and deposits. Once we receive a complaint, we will respond. But we haven't received any complaints yet. The media received relevant news earlier than we did.Zhao Changpeng first wrote "4" in this tweet, which is a popular saying in the Coin An community, urging users not to fear or doubt the platform.

After the announcement of the above news,Bitcoin plummeted by over $1000 in the short term, breaking below the $26000 barrier, and the decline once widened to over 7%As of the close on the 5th, it still plummeted by nearly 6%. Opening on June 6th, it still fell 2% and was temporarily at $25755.99; The Coin An Coin plummeted by over 7%.

According to public data, digital currencies, including Bitcoin, have a 24-hour exposure of $448 million (approximately RMB 3.178 billion), with a total of 118029 people exposed.

What are the charges against the SEC?

In a document submitted to the US Federal Court on Monday, the SEC accused Coin An of violating investor protection rules by operating unregistered exchanges, distorting trading controls, and selling unregistered securities. The SEC stated that one of the reasons for suing Coin An was its unregistered issuance of Coin An Coin and Stable Coin BUSD.

The SEC believes that Coin Security secretly manipulated the operation of Coin Security's US platform, allowing US customers to conduct transactions on its Binance.com website. The SEC stated that despite federal laws prohibiting the issuance and sale of unregistered securities, and knowing that there are tens of thousands of US customers, Coin An chose not to take action. The SEC's lawsuit states that the compliance demonstrated by Coin An to the market in 2019 was largely a public performance.

The SEC claims that Coin An and its CEO misled its investors on risk control issues by mixing customer assets with the company's free assets.

The SEC believes that Zhao Changpeng and Coin An are attempting to subvert "regulatory control" to allow US high net worth investors and clients to continue trading on the unregulated international exchanges of Coin An.

The SEC's indictment states that from June 2018 to July 2021, Coin An's revenue was $11.6 billion,Most of it comes from transaction fees. The SEC believes that since its establishment, the exchange has been under the guidance and control of its founder, Zhao Changpeng, "initially public, later covert," in order to attract American customers.

According to the SEC,Zhao Changpeng ordered the development of regulatory avoidance plans for high net worth clients, using VPN services to conceal their location in the United States, and submitting compliance documents to conceal their country of origin.

The SEC also accused Coin An and Zhao Changpeng of using their controlled market maker companies to raise trading prices and profit from customers. It is said that MeritPeak and SigmaChain serve as "market makers" for both platforms, which means they can always meet customers' orders to purchase or sell encrypted assets. But the SEC's indictment raised multiple issues regarding the roles of these two companies: both were actually owned by Zhao Changpeng and received "tens of billions of dollars" in customer funds. These companies also mix customer funds with Coin's funds, similar to the situation faced by the cryptocurrency exchange FTX at the end of last year.

The worst thing for investors is that they are suspected of participating in "false trading", that is, trading with themselves to support the price of encrypted assets on their behalf.

The SEC has been investigating over the past few months whether Coin An illegally sold virtual currency when the exchange started in 2017. This type of token, known as Coincoin, is now one of the largest in the world. If investors purchase virtual currency to fund a company or project and intend to profit from it, then such transactions related to virtual currency may fall within the jurisdiction of the SEC.

Sued by US regulatory agencies in March

According to Daily Economic News on March 28th, on Monday, March 27th Eastern Time, the US Commodity Futures Trading Commission (CFTC) sued Binance, the world's largest cryptocurrency exchange, and its CEO, Zhao Changpeng, on suspicion of violating regulatory measures.

Image source: Visual China

It is reported that CFTC filed the above-mentioned lawsuit in the Federal Court of Chicago on March 27th Eastern Time. CFTC stated that Coin An did not register with it, thus evading a series of its obligations.

Bloomberg reported that since at least 2021, the CFTC has been investigating whether Coin Security has failed to prevent the US public from buying and selling cryptocurrencies and their derivatives. According to CFTC rules, if a platform allows the American public to trade a certain derivative, it must be registered with that institution.

After being sued by the US CFTC, Zhao Changpeng posted a one character tweet on his personal social media platform titled "4", in response to the fourth clause of his 2023 focus on goals and recommendations released earlier this year: IgnoreFUD, fakenews, attachments, etc, Ignoring FUD (fear, confusion, doubt) messages, fake news, malicious attacks, etc.

According to public information, Coin On is a global cryptocurrency exchange that provides a trading platform for over 100 cryptocurrencies. In April 2018, the 1.4 million transactions per second trading capacity of Coin An attracted 6 million users, making it the world's largest cryptocurrency exchange.

The English name of "Binance" is based on the combination of the word binary and finance, providing more than 150 cryptocurrency transactions, including Bitcoin, Ethereum, Litecoin and its BNB token.

Zhao Changpeng, the founder of Coin An, has already become a well-known figure in the "Coin Circle". Zhao Changpeng was born in Lianyungang, Jiangsu and is a Chinese Canadian entrepreneur. At the end of 2021, against the backdrop of the surge in cryptocurrencies such as Bitcoin, Zhao Changpeng once became the richest Chinese with a fortune of 94.1 billion US dollars (approximately 634.8 billion yuan), and also became one of the world's top ten billionaires, becoming famous worldwide.

The Daily Economic News reporter noticed that this is not the first time that Coin An has been investigated by US regulatory agencies - according to Bloomberg, in June 2022, the SEC investigated whether Coin An's initial token issuance (ICO) in 2017 involved a violation of securities laws.

In addition, this is not the first time CFTC has taken a stab at cryptocurrency exchanges - Reuters reported that last year, CFTC also filed a lawsuit against BitMEX, one of the world's largest cryptocurrency derivatives exchanges, demanding that it stop its US commodity derivatives business.

Daily Economic News Comprehensive Securities and Exchange Commission, Daily Economic News (Reporter: Cai Ding)

(Disclaimer: The contents and data in this article are for reference only, and do not constitute investment advice. It should be verified before use. You should bear the risk of doing so.)