The news about CZ and Binance being in hot legal waters and having to pay all those billions in fines is still making the rounds everywhere. One thing I noticed is that much isn't really said about the charges against Binance and CZ. Like, what did they really do?

I read things about the matter from famous crypto news outlets, but I still feel like I didn't get the full gist, like something is missing. I even wrote a post about it yesterday and didn't dive deep enough into what all the legal issues really are.

So I'm here to do that. To dive deep into the whole thing, for people who want to get the full gist like me. People who are curious about all the things CZ and Binance actually did wrong, and how wrong it was.

I had to access the official document filed in court by the SEC for this purpose. So I have the full gist, and I've brought it to you. You can read the document here for yourself if you want to or else my summary and additional talk has got you covered.

The Summary of the Charges Against CZ and Binance

The SEC filed 13 charges against CZ and Binance. That is 13 legal accusations against them. They are:

1. Disregard of federal securities laws and the market and investor protection this law provides. So investor assets were at risk as a result of disregarding these laws.

2. Unregistered offers and sales of crypto assets and investments. Unlawfully letting US citizens register, trade, and invest on their sites. And lying to investors that they surveyed their Binance.US platform to prevent manipulative trading when there was no such surveillance.

3. Offering the service of exchange, broker-dealer, and clearing agency without first registering with the SEC. And they knew registration was required, but they didn't register because they didn't want to be regulated and overseen.

4. Sale of BNB and BUSD, a scheme called "BNB Vault", "Simple Earn", and a sort of staking investment scheme. And not telling investors of the risks of these schemes.

5. Giving misrepresentations to investors about controls they claim to have implemented on Binance.US, and raising over $200 million from private investors and billions in trading volume.

6. Implementation of plans to evade registration under US federal law.

7. Creating BAM Management and BAM Trading in the US and claimed that they had control of Binance.US but in reality CZ was the one in control of Binance.US.

8. Claiming Binance.com did not provide services to US people, but behind the scenes making sure valuable US customers still traded on the platform. Claiming, in 2019, that US users were blocked from Binance.com but assisting high-value US customers to still keep trading there.

9. Not registering and subjecting themselves to US laws put their customers' assets at risk and their mercy. They transferred funds in ways that registered firms could not, like mixing customers' funds in personal accounts.

10. They knew regulation and surveillance were important but didn't go for it.

11. They touted the surveillance that was supposed to be on Binance.US.

12. They didn't have rules on Binance.US to prevent manipulative and fraudulent acts. Their controls didn't guard against "wash trading" or self-dealing which was occurring on the site. Especially from September 2019 to June 2022. Sigma Chain, owned by CZ, engaged in wash trading that falsely inflated the volume of trading assets.

Wash trading means selling to yourself just to make it look like buying and selling is going on.

13. Evading registration, operating with conflict of interest, and staying away from all the protection US laws would have given to investors.

Shortest Version/Conclusion

None of these state that Binance stole customer funds or defrauded the customers of their money. Not did they say that finds were mismanaged and might be unavailable for customers to withdraw.

But the shortest summary is that they didn't register in the US, but kept taking US customers and lying about blocking US customers from Binance.com.

Binance.US which was for US customers was supposed to be controlled by BAM Trading and BAM Management, but CZ was the one controlling it. Binance.US also didn't put measures in place to stop fraudulent and manipulative acts, but they lied that they did. Binance.US also falsely inflated its trading volume to make it look like big numbers were being traded.

The fact that none of these is about mismanagement or theft of funds is quite a good look. We can only see Binance running from US regulations with all these moves. That's the only crime they committed.

Falsifying trade volume on Binance.US was clearly just because they had to create Binance.US for the American people and they were desperate to make it look bustling to attract Americans. If they didn't have to create Binance.US, the volume they have on Binance.com would have been impressive enough and falsification wouldn't have been important.

They also controlled Binance.US from behind the scenes because they never meant to leave control in anyone else's hands. BAM Trading/Management was only created as a front and not because Binance needed anyone to help manage Binance.US.

Not having proper surveillance on Binance.US was to help the falsification of volume, and things like that. It is quite benign because it wasn't because they wanted to embezzle funds.

I'm not trying to make excuses for Binance, I'm only trying to show how everything was just about escaping regulations rather than some other evil agenda.

Also, it speaks well of Binance that assets were completely left at their mercy but they didn't tamper with it, steal it, or "lose" it. Some harm is done to their reputation but Binance does not lose their "good guys" status as a result of this case.

[Cover photo from Coingape]