The US Securities and Exchange Commission (SEC) has alleged that Binance.US orchestrated laundry trading in a lawsuit against the cryptocurrency exchange. Now, a Wall Street Journal report has revealed internal company communications, showing that Binance founder and CEO, Changpeng Zhao, was aware of the wash trade on the US arm.
“That was my thought,” Zhao said in an internal message after launching Binance.US, which handled about $70,000 in trades in the first hour.
Washing trading is the practice of inflating trading volumes through internal execution of buy and sell orders. This creates a false impression of demand on the exchange, which guarantees liquidity. These practices are illegal, but many cryptocurrency exchanges, with little or no regulatory oversight, regularly inflate their trading volume. According to a study published in Management Science, about 70 percent of cryptocurrency trading volumes in the second half of 2019 came from laundered trading.
In the lawsuit against Binance, its two US companies, and CEO Zhao, the SEC alleged that it laundered trading on the US platform using dozens of user accounts owned by Sigma Chain, a Swiss trading firm controlled by Zhao.
Although the SEC did not name anyone who may have conducted the laundering trades, it was highlighted that Zhao directed dozens of Binance employees to conduct Sigma Chain operations.
However, Binance denies the allegations of laundering trading.
“We firmly believe that the SEC’s allegations of laundry trading are completely unfounded and based on a fundamental misunderstanding of the facts and misapplication of relevant law,” a Binance spokesperson said.
2/11 SEC allegations against Binance, https://t.co/BcnoGtsaNV, and Czechoslovakia shook the industry. One of the high-profile accusations was their involvement in Wash Trading, particularly on BNB US. Cryptocurrency trading volume on Binance has surpassed BTC and ETH, which is unusual for US exchanges pic.twitter.com/mFvYVcq9vp
– DeFi NTR (DeFi_NTR) July 16, 2023
Wash cryptocurrency trading
Laundering trading has spread in cryptocurrencies. Apart from Binance, popular cryptocurrency exchanges have also faced allegations of such illegal practices. In 2021, the US Commodity Futures Trading Commission (CFTC) fined Coinbase $6.5 million for inaccurate reporting as well as laundering trading on its institutional platform.
Meanwhile, Binance has faced severe regulatory backlash in the US and abroad. It closed its derivatives operations in Australia after a regulatory investigation, while in Europe it deregistered entities in Cyprus and the UK and exited the Netherlands. The exchange is facing an investigation in France over illegal operations and anti-money laundering violations.
The US Securities and Exchange Commission (SEC) has alleged that Binance.US orchestrated laundry trading in a lawsuit against the cryptocurrency exchange. Now, a Wall Street Journal report has revealed internal company communications, showing that Binance founder and CEO, Changpeng Zhao, was aware of the wash trade on the US arm.
“That was my thought,” Zhao said in an internal message after launching Binance.US, which handled about $70,000 in trades in the first hour.
Washing trading is the practice of inflating trading volumes through internal execution of buy and sell orders. This creates a false impression of demand on the exchange, which guarantees liquidity. These practices are illegal, but many cryptocurrency exchanges, with little or no regulatory oversight, regularly inflate their trading volume. According to a study published in Management Science, about 70 percent of cryptocurrency trading volumes in the second half of 2019 came from laundered trading.
In the lawsuit against Binance, its two US companies, and CEO Zhao, the SEC alleged that it laundered trading on the US platform using dozens of user accounts owned by Sigma Chain, a Swiss trading firm controlled by Zhao.
Although the SEC did not name anyone who may have conducted the laundering trades, it was highlighted that Zhao directed dozens of Binance employees to conduct Sigma Chain operations.
However, Binance denies the allegations of laundering trading.
“We firmly believe that the SEC’s allegations of laundry trading are completely unfounded and based on a fundamental misunderstanding of the facts and misapplication of relevant law,” a Binance spokesperson said.
2/11 SEC allegations against Binance, https://t.co/BcnoGtsaNV, and Czechoslovakia shook the industry. One of the high-profile accusations was their involvement in Wash Trading, particularly on BNB US. Cryptocurrency trading volume on Binance has surpassed BTC and ETH, which is unusual for US exchanges pic.twitter.com/mFvYVcq9vp
– DeFi NTR (DeFi_NTR) July 16, 2023
Wash cryptocurrency trading
Laundering trading has spread in cryptocurrencies. Apart from Binance, popular cryptocurrency exchanges have also faced allegations of such illegal practices. In 2021, the US Commodity Futures Trading Commission (CFTC) fined Coinbase $6.5 million for inaccurate reporting as well as laundering trading on its institutional platform.
Meanwhile, Binance has faced severe regulatory backlash in the US and abroad. It closed its derivatives operations in Australia after a regulatory investigation, while in Europe it deregistered entities in Cyprus and the UK and exited the Netherlands. The exchange is facing an investigation in France over illegal operations and anti-money laundering violations.
