US market regulator the Securities and Exchange Commission (SEC) has launched an investigation into whether global crypto exchange Binance violated securities law by selling its BNB in an initial coin offering (ICO) some five years ago.
String of Regulatory Challenges
The SEC’s investigation into BNB, now the fifth-largest cryptocurrency by market capitalisation, relates to its ICO in 2017 where it is alleged it was sold without being registered.
In response to the allegations, a spokesperson from Binance commented:
As the industry has grown at a rapid pace, we have been working very diligently to educate and assist law enforcement and regulators in the US and internationally, while also adhering to new guidelines. We will continue to meet all requirements set by regulators.
Binance statement
At this early stage, information remains somewhat limited with Binance adding that it “would not be appropriate for us to comment on our ongoing conversations with regulators, which include education, assistance, and voluntary responses to information requests”.
Binance’s CEO, Changpeng ‘CZ’ Zhao, was less diplomatic in his assessment:
Aside from the SEC investigating several other high-profile ICOs, Binance is also under the microscope after it was hit with a US$5 million class-action lawsuit in which users claimed the exchange sold them 79 different crypto assets (including Dogecoin, Solana, and Cardano) that should have been properly registered as securities.
Vocal Responses from the Bitcoin Community
Max Keiser, Bitcoin maximalist and co-host of the Orange Pill podcast, did not mince his words in response to the news:
SPOILER ALERT 🚨
Yes! $BNB is an unregistered security
So is everything that’s not #BTC
(The @SECGov has ruled that #BTC is *not* a security)All DeFi definitely is a security (looking at you $CEL)
All NFT’s definitely are too. https://t.co/Ux5zX3uzJK
— Max Keiser: Bitcoin Pioneer 🇸🇻🌋🧡 (@maxkeiser) June 6, 2022
Cory Klippsten, founder of Swan Bitcoin exchange, was somewhat more charitable, while sharing the sentiment held by the majority of Bitcoiners:
Will the SEC investigation of @binance $BNB affect other centrally controlled and issued exchange tokens that were clearly marketed and sold as profit-making opportunities? https://t.co/FBbq1JJhNS
— Cory Klippsten (@coryklippsten) June 7, 2022
Michael Saylor, the inimitable founder and CEO of MicroStrategy, has previously said he is of the view that everything outside of Bitcoin is a security. Given that Saylor has spent the better part of three decades operating in US capital markets, you’d imagine he and his legal team have their finger on the regulatory pulse.
Saylor certainly made the point crystal clear in a recent interview with former hedge fund manager Raoul Pal, in which the two clashed over what Pal considered to be “outdated securities laws”:
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