Despite the Securities and Exchange (SEC) Enforcement Week, Bitcoin and other cryptos have rallied, with Bitcoin climbing back up above $27,000 on Tuesday for the first time since the weekend. “The fact that the market has rebounded leads me to believe that this was at least partially priced in,” said Joshua Franklin, CEO and co-founder of digital asset information services platform The Tie. “No one is surprised by Gensler’s actions.”
The SEC identified 13 tokens, including BNB, Binance’s exchange token, ADA and SOL, the tokens of smart contracts platforms Cardano and Solano, and Layer 2 platform Polygon’s MATIC, as unregistered securities.
Comparing and contrasting the accusations that Binance co-mingled funds with those against FTX, which also co-mingled funds, might be tempting. However, these comparisons are superficial. While they could both be described as co-mingling, the process and implications are different. The SEC suggests that billions of dollars of customer funds were accessible to entities connected to Binance CEO Changpeng “CZ” Zhao, namely market makers Merit Peak and Sigma Chain.
The Tie’s Franklin noted that institutional investors remain ambivalent months after crypto exchange FTX’s spectacular collapse in November and the increasingly harsh U.S. regulatory environment. “Many funds that invested in FTX got burned, and some partners that led their firms’ FTX deals were fired,” Franklin wrote.
Central to FTX’s co-mingling problem is FTT, and how it played a role at Alameda Research. As CoinDesk reported last November, a large portion of Alameda’s assets consisted of FTT tokens, which were issued by FTX. This arrangement raised massive questions about the interconnectedness of the two entities, particularly given that the value of the FTT token is partly sustained by FTX’s own activities.
Binance’s accusations revolve more around the alleged diversion of customer funds and interference in U.S. operations, while the issues with FTX/Alameda pertain to blurred lines between the two entities and the non-segregation of customer funds.