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Binance BNB Coin Takes a Hit on News of Potential SEC Investigation

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digital bitcoin - Binance BNB Coin Takes a Hit on News of Potential SEC InvestigationBinance Coin (BNB) was down 8% this morning on news reports of a possible Securities and Exchange Commission (SEC) investigation. According to Bloomberg, investigators will probe whether Binance should have registered its initial coin offering (ICO) as a security sale. The Bloomberg report quoted anonymous inside sources, but the investigation has not been officially confirmed by the SEC or Binance.

The difference between cryptocurrencies and securities

There are various agencies involved in cryptocurrency regulation in the U.S. The Commodity Futures Trading Commission (CFTC) and the SEC both play key roles. Most cryptos currently count as commodities and come under the purview of the CFTC. But the SEC argues that some projects are actually securities, and should instead fall under its jurisdiction.

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The discussion over whether some cryptocurrencies are actually securities is key to several of the regulatory tangles faced by the industry. If a product is a security, it needs to follow strict rules -- for example, in how it reports information. There are also rules about how securities can be traded. If a product is a commodity, it doesn't have to abide by the same playbook.

Speaking last year, SEC Chair Gary Gensler said that many ICOs were actually securities. He argued that crypto is like the Wild West, and needs more control and more investor protection. Gensler says a number of cryptos fit the definition of an investment contract -- a type of security -- and should be subject to securities laws. "I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight," he said.

The SEC already has an ongoing court battle with one cryptocurrency -- Ripple (XRP) -- that it says operated as an unregistered security. The SEC filed charges in December 2020, accusing Ripple of failing to register its XRP token as a security. Ripple disagrees and argues that the SEC should have given much clearer instructions about what constituted a security.

What it means for investors

A SEC investigation is concerning for BNB holders, particularly as it isn't Binance's only regulatory headache. Last year, Binance had issues in various countries, including the U.K., U.S., Japan, Germany, Thailand, and others. The probe may come to nothing, but ongoing issues with various different authorities could pose a threat to BNB's long-term viability. Binance has increased its compliance team by 500% and says that it is serious about regulatory compliance. It remains to be seen whether this will prove to be too little, too late.

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Reuters | Angus Berwick and Tom Wilson | Jun 6, 2022

In Depth Reuters Investigation:  Binance had no idea who was moving money through their exchange

For five years, the world’s largest cryptocurrency exchange Binance served as a conduit for the laundering of at least $2.35 billion in illicit funds, a Reuters investigation has found.

In September 2020, a North Korean hacking group known as Lazarus broke into a small Slovakian crypto exchange and stole virtual currency worth some $5.4 million. It was one of a string of cyber heists by Lazarus that Washington said were aimed at funding North Korea’s nuclear weapons programme.

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Several hours later, the hackers opened at least two dozen anonymous accounts on Binance, the world’s largest cryptocurrency exchange, enabling them to convert the stolen funds and obscure the money trail, correspondence between Slovakia’s national police and Binance reveals.

In as little as nine minutes, using only encrypted email addresses as identification, the Lazarus hackers created Binance accounts and traded crypto stolen from Eterbase, the Slovakian exchange, according to account records that Binance shared with the police and that are reported here for the first time.

because of the anonymous nature of the accounts, said Eterbase co-founder Robert Auxt, whose firm has been unable to locate or recover the funds.

Eterbase’s lost money is part of a torrent of illicit funds that flowed through Binance from 2017 to 2021, a Reuters investigation has found.

During this period, Binance processed transactions totalling at least $2.35 billion stemming from hacks, investment frauds and illegal drug sales, Reuters calculated from an examination of court records, statements by law enforcement and blockchain data, compiled for the news agency by two blockchain analysis firms. Two industry experts reviewed the calculation and agreed with the estimate.

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Separately, crypto researcher Chainalysis, hired by U.S. government agencies to track illegal flows, concluded in a 2020 report that Binance received criminal funds totalling $770 million in 2019 alone, more than any other crypto exchange. Binance CEO Changpeng Zhao accused Chainalysis on Twitter of “bad business etiquette.”

Reuters’ new reporting following the April article shows that many people who signed up to Binance in Russia weren’t using it for trading. Instead, Binance became a key payment provider for Hydra, the giant darknet marketplace, according to the blockchain data compiled for Reuters, a review of Hydra user forums, and interviews with illegal drug users and researchers.

Darknet dealings - Binance BNB Coin Takes a Hit on News of Potential SEC Investigation

After it was set up in 2015, Hydra distributed narcotics on behalf of drug dealers, all priced in bitcoin, to millions of buyers, mostly in Russia.

German police, in coordination with U.S. authorities, seized Hydra’s servers in Germany in April, closing the site down. The U.S. indicted a Russian resident, Dmitry Pavlov, for administering the servers. A week later, Russian authorities arrested Pavlov for allegedly dealing in drugs, a Moscow court said, adding he had filed an appeal.

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NCFA Jan 2018 resize - Binance BNB Coin Takes a Hit on News of Potential SEC InvestigationThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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