First Mover Americas: SEC Sues Kraken; Binance Faces $4B Settlement

This article originally appeared in First Mover, CoinDesk’s daily newsletter putting the latest moves in crypto markets in context. Subscribe to get it in your inbox every day.

Binance Holding Ltd. would be asked to pay $4 billion to settle U.S. Department of Justice accusations of multiple criminal violations, according to a report from Bloomberg News on negotiations between the DOJ and the company, which also leave open the possibility its founder Changpeng "CZ" Zhao will face U.S. criminal charges. Binance has been under a lengthy investigation by U.S. authorities for money laundering, bank fraud and violating U.S. sanctions laws, and the talks could reportedly conclude in the coming weeks. A spokesperson with the DOJ declined to comment to CoinDesk. Binance didn't immediately respond to a request for comment.

Crypto exchange Kraken commingled customer and corporate funds while operating as an unregistered broker, clearing agency and dealer, the U.S. Securities and Exchange Commission (SEC) alleged in a new lawsuit Monday. The federal regulator claimed that the San Francisco-based company violated federal securities laws in a repeat of its suits against other crypto trading platforms. Unique to Monday's lawsuit are claims that Kraken created a "significant risk" by commingling up to $33 billion in customer crypto with its own corporate assets, the regulator said, quoting Kraken's independent auditor. "Similarly, Kraken has held at times more than $5 billion worth of its customers' cash, and it also commingles some of its customers' cash with some of its own," the suit said. "In fact, Kraken has at times paid operational expenses directly from bank accounts that hold customer cash."

Many of the tokens mentioned in the Kraken lawsuit have actually posted double-digit gains year-to-date. Although many would think that being named by the SEC in enforcement actions time and time again would be a sort of scarlet letter for tokens and would lead to depressed prices, market data shows that's not the case. Perhaps a lesson to take away from this is that traders value technical capability over regulatory compliance – or they understand that the SEC is not the only regulator on the planet. According to on-chain data, many named tokens have outperformed bitcoin as part of a broader market rally. The "basket" of these tokens is up an average of 41%. Solana's SOL is up nearly 463% year-to-date. In June, when the SEC first accused SOL of being an unregistered security, the Solana Foundation quickly hit back to deny the accusations, and, as CoinDesk reported at the time, the developer community was largely indifferent.

We may earn a commission from partner links. Commissions do not affect our journalists’ opinions or evaluations. For more, see our Ethics Policy.

- Omkar Godbole