SEC Investigating Binance over BNB Token

US regulators are investigating whether Binance Holdings Ltd. broke securities rules by selling digital tokens just as the crypto exchange was getting off the ground five years ago, according to people familiar with the matter.

The Securities and Exchange Commission(SEC)' s review pries into the firm's origins and those of its BNB token, which is now the world's fifth-biggest. Investigators are examining if the 2017 initial coin offering amounted to the sale of a security that should have been registered with the agency, said the people who were granted anonymity to discuss the confidential probe.

In a statement, Binance said: "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." The company added that it works with authorities and "we will continue to meet all requirements set by regulators."

The SEC declined to comment.

Binance, which runs the world's biggest exchange and says it's not domiciled in any one country but has affiliates scattered across the globe, has emerged as a focal point for American investigators seeking to rein in the crypto industry. 

An SEC enforcement investigation may not lead to the regulator suing a firm or individuals. The probe involving BNB is likely months away from any conclusion, one of the people familiar with the matter said.

Beyond BNB, the SEC is also probing possible trading abuses by Binance insiders and whether Binance.US, an American affiliate formed in 2019, is appropriately hived off from its global counterpart, one of the people said. 

Another person with direct knowledge of the review said the SEC is also looking at market-making companies tied to Zhao, who is widely known as CZ. The SEC has expressed interest in Zhao's ownership stakes of market makers on Binance.US and whether the exchange has conducted broker-dealer activities, the person said. 

Binance emphasized that Binance.com and Binance.US "are separate entities," with the former only for non-US users. "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," the firm said.

In a separate statement, Binance.US said it was "committed to upholding the highest standards of compliance.”

Source: Bloomberg