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US declares war on Wild West crypto: Binance and Coinbase exchanges targeted in major crackdown By Leah Montebello For The Daily Mail Published: 16:51 EDT, 6 June 2023 | Updated: 16:51 EDT, 6 June 2023 e-mail View comments The crypto world plunged deeper into crisis yesterday as US regulators targeted two of the world’s largest exchanges. In a move that sent shockwaves through the industry, the Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase over claims the trading platform was operating illegally in the country. The case against Coinbase came just a day after the SEC accused Binance and its boss of ‘an extensive web of deception’ and ‘calculated evasion’ of US laws. The two companies together account for around half of global trading in digital assets such as bitcoin. The cases represent a widening crackdown on the crypto industry, which SEC chairman Gary Gensler has branded a ‘Wild West’ for investments. Allegations: The US Securities and Exchange Commission has filed a lawsuit against crypto exchange Coinbase over claims the trading platform was operating illegally in the country For Coinbase, the SEC alleges bosses were ‘fully aware’ that its business was subject to securities laws, including registering as a broker and exchange, but decided to ignore it. ‘Coinbase’s alleged failures deprive investors of critical protections, including rule books that prevent fraud and manipulation, proper disclosure, safeguards against conflicts of interest, and routine inspection by the SEC,’ Mr Gensler said. The Wall Street regulator has also launched an attack on the world’s largest crypto currency exchange, Binance. On Monday, the SEC sued the firm and its founder Changpeng Zhao, accusing it of mishandling customer funds, inflating trading volume on the site and taking steps to dodge US regulation. The complaint claims Binance secretly commingled ‘billions of dollars’ of customers’ assets and sent them to a third party, Merit Peak Limited, which is owned by Zhao. RELATED ARTICLES Previous 1 Next MAGGIE PAGANO: Stay of execution for CBI as new boss manages... Shell puts household energy business up for sale amid fresh... Bank boss warns of tax trap on savings as interest rates... Blockbuster sales at Odeon as Spider-Man swings in to... Share this article Share HOW THIS IS MONEY CAN HELP How to choose the best (and cheapest) stocks and shares Isa and the right DIY investing account Outlining 13 civil charges, Gensler said: ‘We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.’ The regulator accused Zhao of seeking to enrich himself with little regard for his investors. ‘We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximise their own profits,’ said Gurbir Grewal, director of the SEC’s enforcement division. Regulators have been on red alert after a string of high-profile collapses wiped out more than a trillion dollars from crypto’s market capitalisation last year. The collapse of FTX in November was the biggest of these failures, sparking a cryptocurrency rout and leaving an estimated one million creditors facing losses of billions of dollars. Arrest: Disgraced FTX founder and chief exec Sam Bankman-Fried (pictured) is facing 13 charges including fraud and money laundering as well as foreign bribery Disgraced FTX founder and chief executive Sam Bankman-Fried is facing 13 charges including fraud and money laundering as well as foreign bribery. He has denied all charges against him and is under house arrest at his parents’ home in California until trial later this year. Analysts have said the crypto world is still feeling a hangover from the FTX drama. ‘The robust language used by the SEC, along with the lengthy list of charges, suggests this latest fiasco to engulf the crypto market is going to rumble on for some time,’ said Laith Khalaf, head of investment analysis at AJ Bell. ‘At the moment it feels like the crypto bubble is suffering death by a thousand punctures.’ In a response to the news of the lawsuit against Binance, its boss Zhao wrote on Twitter: ‘Our team is all standing by, ensuring systems are stable, including withdrawals and deposits. We will issue a response once we see the complaint. Haven’t seen it yet.’ He claimed Binance’s ‘size and global name recognition’ meant it has become ‘an easy target now caught in the middle of a US regulatory tug-of-war’. Binance has over 100m customers across the world and the founder accused the SEC of lodging the suit just to ‘make headlines’. Coinbase chief legal officer Paul Grewal said: ‘The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance. The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. ‘In the meantime, we’ll continue to operate our business as usual.’ Bosses in the firing line In the firing line: Coinbase’s Brian Armstrong and Binance’s Changpeng Zha The latest crypto clampdown has thrust two of the industry’s biggest names into the spotlight. Binance’s Changpeng Zhao and Coinbase’s Brian Armstrong have enjoyed meteoric success in recent years. Zhao, 46, a Chinese-born Canadian known as CZ, launched Binance in Shanghai in 2017. Fast forward six years and the exchange has become the largest in the world – processing trades worth £52billion a day – and he is estimated to be worth £8.5billion. Coinbase was also under fire. San-Francisco based Coinbase was founded in 2012 by former Airbnb engineer Armstrong and Fred Ehrsam. The company made its Nasdaq debut in 2021 at the height of the crypto frenzy with a value of £69billion. Although shares have plunged nearly a third in the past six months – largely driven by the fallout from FTX’s bankruptcy spooking investors – Armstrong, 40, is still worth an estimated £1.8billion. DIY INVESTING PLATFORMS Stocks & shares Isa Stocks & shares Isa Easy investing Capital at risk. Isa rules & T&Cs apply. Investment ideas Free fund dealing Free fund dealing 0.45% account fee capped for shares Flat-fee investing No fees £9.99 monthly fee One free £5.99 trade per month Social investing Social investing Share investing 30+ million global community Model portfolios Investment account Free fund dealing Free financial coaching Affiliate links: If you take out a product This is Money may earn a commission. This does not affect our editorial independence. > Compare the best investing platform for you Share or comment on this article: US declares war on Wild West crypto: Binance and Coinbase targeted in crackdown e-mail Add comment Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence. Comments 0 Share what you think No comments have so far been submitted. 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