Is Binance Running An Illegal Securities Exchange?

Updated: 04 March 2023

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During a Voyager Bankruptcy hearing to determine whether Voyager should sell its assets to Binance.US, a U.S. Securities and Exchange official noted that the agency believes Binance.US is running an unregistered securities exchange in the United States.

NEW: An @SECgov official, speaking at a bankruptcy hearing to determine if Voyager should be sold to Binance US, said the agency's staff believes Binance US is operating an unregistered securities exchange in the U.S.@nikhileshde reportshttps://t.co/WeFntILMKe

— CoinDesk (@CoinDesk) March 3, 2023

Notably, the agency staff believes that the sale of VGX tokens by Voyager Digital violated the fed’s securities law, as per CoinDesk reports.

On March 2, U.S. Judge Michael Wiles appeared skeptical about an attempt by the SEC to stop the purchase of assets of defunct crypto lender Voyager Digital by Binance.US. As per Reuters reports, Wiles addressed the counsel of the SEC, noting:

You come here and tell me that I should stop everyone in their tracks because you might have an issue—it’s kind of a weird objection.

However, the SEC Senior Trial Attorney William Uptegrove responded to Judge Michael Wiles, who noted that the SEC had provided little guidance about its objection to the Voyager sale. Uptegrove asserted:

Based wholly on the facts and circumstances currently known to the staff, the staff believes that the offering and sale of VGX tokens have attributes of a securities transactions.

The SEC Senior Trial Attorney further asserted that “the staff believes that Binance.US is managing an unregistered securities Exchange in the United States.”

Noteworthy, the official noted that SEC’s views don’t contemplate the opinions of other commissioners at the end of the agency. Additionally, he did not state whether any enforcement actions were in the works to his declaration by the SEC. He asserted:

The Commission has not made any decisions on either of these issues. Notably, the staff beliefs do not represent the commission’s views.

Usually, enforcement action by the SEC is started by the staff. However, it needs a majority of commissioners to vote in favor in order for it to proceed.

Binance.US on SEC’s staff allegations

The Binance spokesperson has given his remarks concerning SEC’s allegation, noting:

It is regrettable that the SEC staff member could make allegations that Binance.US and platforms like ours are operating an unregistered exchange. They have made these allegations without specifying the assets listed on our exchange that the SEC considers securities.

The spokesperson has further asserted that Binance and other crypto firms in the ecosystem remain committed to a detailed dialogue with regulators. They also support an extensive regulatory framework drafted and passed by Congress to make sure that innovation continues in the United States.

It is worth noting that Uptegrove’s comments echo SEC’s Chair, Gary Gensler. The SEC chair previously stipulated that most crypto trading companies should be registered as national securities exchanges. This would enable them to operate under the agency’s disclosure and compliance regime.

Noteworthy, Voyager plans to sell its assets to Binance.US as part of its restructuring plan. Many of Voyager’s creditors have supported the proposal. Once Voyager users have Binance.US accounts, they can withdraw for the first time since the firm froze their accounts last summer. Noteworthy, Voyager filed for bankruptcy protection in July, months after the crash of significant crypto tokens TerraUSD and Luna.