U.S Securities and Exchange Commission opens an investigation to examine the initial coin offering of Binance token, BNB coin in 2017. According to a Bloomberg report, U.S regulators seem adamant about probing the coin’s security, whether it was registered during the sale in 2017 or not. Binance is not the only one, rather many cases have been taken up by the U.S authorities regarding virtual currency securities.
With the rise of cryptocurrencies and blockchain technology in the mainstream, many people have been investing billions of dollars in the industry. To ensure that no one falls under a massive rug pull or scams, U.S. The SEC has been investigating various companies and individuals for various cases.
Recently, it rejected a Spot Bitcoin ETF application and raised concerns over fraud-prevention measures. It has been quite strict with regulations and has also received a lot of backlash from the crypto figures.
Binance comes under the SEC radar
Binance is one of the largest crypto exchanges in the world. It was launched in 2017 as DEX and later, in the same year, it dropped its native token, the BNB coin, previously known as the Binance coin, via Initial Coin Offering (ICO).
Initial Coin Offering is a type of funding in which the company raises funds through cryptocurrency. It is unregulated funding and investors are offered the company’s native token in exchange.
BNB coin was launched at the price of 15 cents in the public sale and managed to collect around $15M funds that helped in completing its existing projects and further developing into a leading decentralized crypto exchange.
SEC launched an investigation against Binance’s arm, Binance.US to probe whether the company registered BNB as security and if it raised capital via ICO illegally.
According to Binance’s whitepaper, the ICO funds were used for the betterment of the company itself. In 2017, BNB circulation was limited to 200 million tokens. Half of the tokens were sold through ICO in reservations to angel investors and backers on various platforms worldwide. 80 million tokens were reserved for the core team, including Binance’s CEO Changpeng Zhao.
Bloomberg reports that Binance “offered lower fees for traders paying with the token.” The company has strong proof to defend itself from the U.S. regulators as “it paid many of its contractors in the currency.”
An insider that talked to Bloomberg said that the SEC is also investigating Binance to see if it has any ties with market-making companies. Additional information revealed that despite the exchange’s claim that Binance.com and Binance U.S. are separately operated, SEC is still under suspicion that it might not be the case.
The exchange claims, “Binance.US is a separate US-focused trading platform that services US users by offering products and services that are compliant with US federal and state regulations.”
Binance buried under investigations
The BNB coin investigation isn’t the only one taking place as of now, Binance has been probed many times by SEC for various cases. The regulators seem to find suspicious activity within the exchange that might be violating U.S. laws.
Binance is also under investigation by the Justice Department, the Commodity Futures Trading Commission (CFTC), and the Internal Revenue Service in the U.S. making it hard for the exchange to operate fully.
Just recently, a Reuters article reported Binance’s weak regulation on its platform for money laundering. It was also under fire for sharing user data with a Russian agency. The exchange strictly denied the allegations by releasing an official statement.
Despite so many cases and suspicions raised against Binance, it still maintains its position in the crypto market. Following Bloomberg’s report, the prices are currently trading at $295 with a $48 billion market cap.
What happens if BNB is security?
Before Binance, Ripple Labs Inc. was also investigated for its native token, XRP by the SEC. The results took months and eventually, the regulators proved that XRP was a security. Ripple defended its token by saying that the regulators’ legal theory had flaws and is currently still in a legal battle with them.
If the SEC proves that BNB is a security, it might face the same hardships as the XRP token. However, based on the recent updates on the XRP case, the regulators seem to be having a hard time defending it.
Regarding the investigation, Binance released an official statement stating “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.” and that it will comply with whatever rules or requirements the regulators set for them.
SEC officials refused to comment on anything.