HomeBlockchainRegulationTrouble for Binance: SEC investigation for insider trading?

Trouble for Binance: SEC investigation for insider trading?

Bloomberg, the most important American financial news agency, has reported that the world’s largest exchange Binance has been investigated by the US Securities and Exchange Commission (SEC) for financial market manipulation.

SEC putting Binance under investigation due to improper use of data?

According to anonymous sources, the authority supervising the American stock exchange has accused the exchange of using data and information on the trading activity of its users to carry out operations on the markets for its own purposes. 

The Commodity Futures Trading Commission, which oversees derivatives trading, is said to be participating in the investigation and has already called witnesses.

“At Binance, we have a zero-tolerance policy for insider trading and a strict ethical code related to any type of behavior that could have a negative impact on our customers or industry”

The company said this in a statement to financial newspaper Business Insider, but would neither confirm nor deny the news reported by Bloomberg.

Binance SEC investigation
Authorities worldwide are paying attention on Binance

All the problems with Binance’s regulators

This is not the first investigation by regulators that the world’s most popular cryptocurrency exchange has faced.

In the US, the Department of Justice opened an investigation in May for money laundering and tax evasion. The CFTC had already been investigating the Chinese exchange for weeks, because it allowed US residents to buy and sell derivatives linked to Bitcoin and other virtual tokens, without having the necessary authorization.

It isn’t only in the US that Binance has been under the spotlight of regulators and judges for some time.

In the UK, authorities in June banned the UK division of the exchange from operating in the country. The FCA accused Binance Market Limited, the UK division of the exchange, of not having any kind of authorization to offer certain financial services.

Regulators in Italy, Canada, Thailand, Japan and South Korea have also restricted or prohibited Binance from offering certain services in their respective countries.

Binance and its lack of transparency

On 14 September, the large Chinese exchange hit a volume record of $30 billion, confirming its role as the world’s top exchange.

Founded in 2017 in China by Changpeng Zhao and Yi He, it has since changed its registered office to the Cayman Islands to avoid restrictive cryptocurrency laws by Chinese authorities.

This inevitably raised many doubts about its regularity and transparency, as it was based in a well-known tax haven. But its founder has always said that in reality Binance has no headquarters.

In 2020, Binance generated about $900 million in profits and among the goals of its ambitious founder is to list the exchange on the Nasdaq within three years, a goal that will be difficult to achieve without addressing the issue of transparency and regulation of the exchange itself.

Binance’s great success is mainly due to its much lower commission policy compared to other exchanges such as Kraken or Coinbase, and its wide range of additional services, such as cryptocurrency lending, in exchange for a commission.

Many doubts remain about its transparency and security, despite the reassurances the company continues to give its users. Hundreds of thousands of investors are filing a $20 million class action lawsuit against the exchange for the serious crash that hit the platform on 19 May, preventing many traders from liquidating their positions during a market crash.


Vincenzo Cacioppoli
Vincenzo Cacioppoli
Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.