Bankless: Why SEC sues Coin An

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit

Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of MarsBit.

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Source: MarsBit

This is really a unlucky Monday. Apple Leaps into the Virtual World, Taylor Swift Breaks Up with Boyfriend, Gary Gensler& Co declared war on Coin An.

Today, we will make an in-depth study of the U.S. Securities and Exchange Commission (SEC)'s complaint against Yen An, uncover its allegations and what may happen next.

The U.S. Securities and Exchange Commission is tracking down Coin An and CZ.

Just over two months ago, the Commodity Futures Trading Commission (CFTC) launched its first shot in the struggle between the U.S. regulators and Binance, emphasizing a series of suspected violations of compliance and the exchange's subversion of internal anti money laundering/KYC controls.

Today, Gary Gensler and the U.S. Securities and Exchange Commission (SEC) filed a series of charges against CZ and his empire. Although the recent lawsuit also attacked Coin Security for providing access to Binance.com to specific US customers, it greatly expanded CFTC's allegations.

The U.S. Securities and Exchange Commission clearly marked a variety of products (including specific tokens) provided on the US platform as securities, questioned the degree of independence provided by Coin Safety International for its US subsidiary, provided evidence of customer fund mixing and transfer, emphasized internal clearing and self trading activities, and artificially exaggerated the trading volume of Binance.us.

Today, we will analyze the complaints from the US Securities and Exchange Commission, revealing its very real concerns about the behavior of Coin Security and the broader intentions of regulatory agencies.

Independence of Binance. US

If the SEC wants to directly strike CZ's empire, it is crucial to extend its jurisdiction from its US subsidiary to the broader Binance International. If this accusation is proven to be correct, then Coin Security International seems to have made the SEC's task quite simple.

Coin An initially realized that providing services to American consumers on Binance.com would make CEX an unlicensed stock exchange (as also captured by the SEC's Twitter account). Afterwards, Coin An hired many consultants to consult with them on how to mitigate potential legal strategies.

Source: Twitter

One of the consultants put forward the "Taiji Program in Space", which will enable Yen An to avoid cooperation with US regulators and continue to conduct business in the US in a "moderate" risk manner.

This plan involves establishing the Tai Chi entity - Coin An. They hope that this will become the "target of all accumulated law enforcement tensions", "reveal, delay, and resolve accumulated law enforcement tensions", and "protect the currency from the impact of legacy and future responsibilities". Under this structure, Coin International will waive transaction fees from the United States and supplement them with license and service fees paid by US entities.

Although the plan aims to separate control of Binance. US from CZ and the wider Binance company, there is still an incredibly close relationship between the two - CZ has held at least 81% ownership of the entity controlling Binance. US since its establishment.

Source: SEC Complaints

Former CEO Brian Brooks ("CEOB" in the indictment) stressed his concern about the liquidity of Binance.US, which came from two Market maker related to CZ.

Until at least December 2022, Coin International will serve as the designated custodian for crypto assets deposited, held, traded, and/or accumulated on Binance. US through a service agreement with its US subsidiary. Our platform This structure provides Coin Security with "sufficient control to manage and authorize the transfer of encrypted assets, including transfers between various comprehensive wallets," without obtaining any authorization from Binance. US.

Worryingly, the U.S. Securities and Exchange Commission said that, as of the time of their complaint, not all encrypted assets stored on Binance.US were "under exclusive custody and control", which indicates that CIC maintains custody rights over some funds of the exchange.

Safety products

The multiple issuance of Coin An has sparked anger from the SEC, which has labeled it as a potential security. These so-called securities not only include the Bet as a Service (SaaS) projects provided by Binance. US. It also includes the BNB, BUSD, BNBVault, and SimpleEarn plans of Coin An.

Pledge services

SEC Binance Binance.US Pledge services

Although the SEC is unlikely to achieve regulation of all PoS tokens through this enforcement action, it once again highlights the controversial relationship between the crypto ecosystem and US regulatory agencies.

Source: Twitter

BNB

SEC tried to establish BNB as a security, emphasizing that the funds raised from "investors" would "help" the security team "to establish a world-class Cryptocurrency exchange". The white paper relies on the professional knowledge of CZ and the founding team, potentially conveying that the success of BNB investment depends on the management of Coin An.

In the SEC's view, the deadliest signs of BNB securities attributes may come from the use of Binance's profits to repurchase and destroy tokens, further linking the success of centralized Binance companies to the price of tokens.

BUSD

SEC believes that the marketing of the BUSDAPY opportunity and the establishment of the "BUSD incentive plan" show that investors may expect to profit from the Stablecoin.

Although the SEC seemed a bit too excited when announcing encrypted assets as securities, which was certainly not an unexpected move, the SEC did operate under untested legal theory, and the reasons were consistent with what they had previously discovered in their complaint against Luna's UST.

Source: Twitter

BNBVault and SimpleEarn

BNBVault and SimpleEarnSEC()

According to US law, both types of issuance may be classified as securities, as the success of an investment depends on management expertise and stems from the efforts of others.

Mixing of funds

FTXMixing of fundsAlameda

Although the SEC has not accused bankruptcy, the obvious lack of effective internal controls means that customer funds are often misappropriated, some even used for personal expenses. This is a very worrying accusation!

Source: Twitter

202210202316250Independence of Binance. US CZ

In addition, the SEC emphasized the transfer of $190 million from Binance. US to another entity controlled by Zhao, SigmaChain, in 2021. The bank account that received funds from these clients continued to spend $11 million on purchasing a yacht.

Just more FUDs?

Undoubtedly, the SEC's accusations against Coin Security are worrying. Equally worrying is the SEC's concerted efforts to stifle a wide range of participants in the encryption industry.

Considering the SEC's lack of confidence in helping seemingly benevolent participants comply with existing rules, even for CZ& Co's allegations are eye-catching, and it is reasonable to question the SEC's motives in this lawsuit.

This lawsuit indicates that as an industry, we will face a lot of regulatory disputes. However, to some extent, this situation also proves the resilience of the industry.

All assets accused by the SEC are securities and will continue to be freely traded on decentralized exchanges. Networks such as Polygon, Solana, Alogrand, and CosmosHub will continue to produce blocks.

Although the government seems to have done its best, the crypto economy will continue to develop.