US SEC Prosecutors Coin An Zhao Changpeng Meets the Most Severe Test

Cailian News Agency, June 6th (Reporter Xu Cihao and Liu Huaixi)On the evening of June 5th, the United States Securities and Exchange Commission (SEC) filed 13 charges against the entity and founder Zhao Changpeng (CZ), including operating illegal trading platforms in the United States; Operating unregistered exchanges, brokerage dealers, and clearing houses; Abuse of customer funds; Unregistered securities issuance and sales, etc.

SEC Chairman Gary Gensler stated in a statement:Through 13 accusations, we accuse Zhao Changpeng and the Coin An entity of widespread fraud, conflicts of interest, lack of disclosure, and intentional evasion of the law. The public should be careful not to invest any hard-earned assets in these illegal platforms.

Affected by this incident, cryptocurrencies collectively fell, with Bitcoin falling 5% to below $26000. As of the press release of $25752; The security native token BNB fell 10% to $276.72.

Industry insiders have analyzed that this move by the United States may make it difficult for Coin Security to continue operating in the United States, while further strengthening its regulatory demands on the currency industry.

Suspected of 13 charges

The SEC's indictment states that from June 2018 to July 2021, Coin's revenue was $11.6 billion, most of which came 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.

The SEC also accused Coin An and Zhao Changpeng of using their controlled market maker company to raise trading prices and profit from customers.

The indictment claims that MeritPeak and SigmaChain acted 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.

In addition, the SEC believes that Coin An secretly manipulated the operation of Coin An'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 indictment states that,The compliance demonstrated by Coin An to the market in 2019 is largely a "public performance".

In response to the SEC's lawsuit this time, relevant personnel from Coin Security told the NEWS reporter of Metaverse that the company has responded to this matter on its official website.

The reporter saw on the official website of Coin An that Coin An responded, "We are very disappointed that the US Securities and Exchange Commission chose to file a lawsuit against Coin An today. From the beginning, we actively cooperated with the SEC's investigation and worked hard to respond to the issues and resolve their concerns. Recently, we have had extensive discussions to reach negotiations and resolve their investigation issues

This is not the first time Zhao Changpeng has been sued by US regulatory agencies.

At the end of March this year, the Commodity Futures Trading Commission (CFTC) sued Zhao Changpeng, accusing the company of intentionally providing unregistered cryptocurrency derivatives in the United States in violation of federal law.

It is worth noting that CFTC filed a lawsuit to the District Court of the Northern District of Illinois in the United States, accusing Jin'an of operating derivatives trading business in the United States, providing cryptocurrency transactions including Bitcoin, Ethercoin and Litecoin, and Tether and Jin'an's USD, which CFTC calls "commodities". The lawsuit also accuses Zhao Changpeng of instructing employees to display their false position through some technology.

What is the impact on Coin Security and Coin Circle?

It is worth mentioning that other currency circle exchanges have also been severely hit by US regulatory agencies. The SEC issued a notice to Coinbase, a US compliant cryptocurrency exchange, in March, warning the company that it may violate US securities laws.

Under continuous regulatory pressure, more and more encryption companies are planning to "escape" from the United States. Brian Armstrong, CEO of Coinbase, a cryptocurrency exchange, has pointed out that the regulatory uncertainty in the cryptocurrency industry in the United States is increasing, and its cryptocurrency trading platform will consider withdrawing from the United States. Previously, Bittrex, the cryptocurrency exchange, announced that it would reduce its operations in the United States.

Wu Wenqian, the compliance officer of MulanaIM and a practicing lawyer at the High Court of the Hong Kong Special Administrative Region, told the NEWS reporter that the US CFTC and SEC have repeatedly filed lawsuits against Coin Security, demonstrating their strong regulatory demands for the encryption industry to the outside world.

If the SEC's accusations against Coin An are confirmed, Coin An will be forced to cease operations in the United States.

Wu Wenqian further analyzed that the lawsuits filed by the United States against Coin An and Zhao Changpeng will also further affect Coin An's compliance business in other places. For example, when applying for a compliance license in Hong Kong, one of the requirements of the Hong Kong Securities Regulatory Commission is to conduct a fit property test on all the ultimate owners, directors, and executives of the applicant institution. If anyone is subject to any regulatory charges outside of Hong Kong, it will have a significant impact on the applicant institution, The Hong Kong Securities Regulatory Commission requires a comprehensive explanation from the parties involved.

This will definitely affect the price of crypto assets in the short term and also affect crypto asset trading platforms outside the United States.

But in the long run, this is a good thing for the crypto digital asset industry.NEWS

• Xu Cihao

  
  

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  Science and Technology Innovation Board Daily Reporter