The US Securities and Exchange Commission is investigating whether crypto exchange Binance Holdings Ltd broke securities laws by selling digital tokens while the crypto exchange was just getting started five years ago.
The SEC review will examine the company’s origins as well as those of its BNB token, now the fifth-largest cryptocurrency.
Binance Holdings’ native token, BNB, lost more than 7% of its value after Bloomberg reported that US regulators are investigating the company.
Binance Coin (BNB) is an exchange-based token issued by cryptocurrency exchange Binance and was originally created on the Ethereum blockchain as an ERC-20 token in July 2017, but was moved to Binance Chain in February 2019.
During the height of the initial coin offering (ICO) boom, BNB ICOs took place on several platforms in July 2017 and Binance opened its doors shortly thereafter.
Investigators are examining whether the 2017 ICO should have been registered as a security.
The SEC has brought dozens of enforcement actions regarding ICOs, in which virtual coins are issued to raise money.
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,” Bloomberg reports, with the company adding it works with authorities and “will continue to meet all requirements set by regulators.”
This scrutiny of BNB’s origins may be troubling for Binance as it faces multiple investigations in Washington.
An investigation by Reuters claimed Binance has been used to launder at least US$2.35bn in illicit funds over the last five years.
Binance is already under investigation by several federal agencies, including the SEC, with the US Commodity Futures Trading Commission launching an investigation last year into the exchange’s trading practices.
The Financial Conduct Authority ordered Binance Markets’ UK operation to cease operations last year following a review of its operations,
Binance was also ordered to stop operating in Ontario last June, although it continued to do so until March of this year, state reports.
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