SEC's Gensler claims ‘parallels’ between Binance and FTX, yet one wasn't sued

The United States securities chair has hinted at “parallels” between crypto exchange Binance and collapsed exchange FTX — namely their alleged use of sister firms to move funds.

Speaking to Bloomberg on June 6, the U.S. Securities and Exchange Commission chair Gary Gensler, pointed to FTX’s alleged fraud and manipulation regarding its sister firm Alameda Research, including the alleged role that its founder Sam Bankman-Fried played in it.

“There’s a business model that bundles and commingles functions that we don’t see, nor would we allow elsewhere, in finance,” he said.

On June 5, the SEC filed a complaint against Binance pressing a total of 13 charges. One of the allegations in the suit claims that funds from Binance and Binance.US were commingled into an account controlled by the Changpeng Zhao-associated Merit Peak Limited.

Another allegation claims that Binance.US engaged in wash trading through its “primary undisclosed ‘market making’ trading firm Sigma Chain,” which is owned by Zhao.

“Platform after platform, entrepreneurs […] are trying to build wealth for themselves and their investors through sister organizations — hedge funds — trading against the customers,” said Gensler.

So where’s the FTX lawsuit?

The recent interview is likely to add more fuel to the ongoing debate on Twitter — why hasn’t the SEC sued FTX?

They didn’t sue FTX. https://t.co/FVgi5l6VcI

— CZ Binance (@cz_binance) June 6, 2023

In a June 6 tweet, Ripple CEO Brad Garlinghouse said the latest string of lawsuits is an attempt by the SEC to “distract” from the agency’s “FTX debacle.”

Others suggested that FTX’s sizeable donations toward political parties and Bankman-Fried’s frequent lobbying in Washington D.C. in the past could also be a factor.

Why didn’t the SEC sue FTX?

Oh that’s right they allowed public servants to take *donations* and colluded with them to further oppress Americans https://t.co/EgKhB99e46

— Wendy O (@CryptoWendyO) June 6, 2023

Meanwhile, Markus Thielen, the head of research and strategy at Matrixport and author of Crypto Titans offered a different perspective. Speaking to Cointelegraph, he explained that before FTX crypto was not seen as a major threat to U.S. financial stability.

The fall of three major banks this year has proven otherwise, he said.

“It wasn’t a priority to fix or stop the crypto rails initially,” said Thielen. “People realized that after FTX, it’s really billions of dollars.”

Thielen also believes there’s a notion of “embarrassment” for those that did not foresee the issues at FTX, including lawmakers.

“You can make an argument that those people feel a little bit embarrassed and therefore they have to work double hard to really distance themselves from it.”

It should be noted that while the SEC has not announced a lawsuit against the FTX exchange itself, the regulator has laid charges against its founders and former executives.

These include former FTX CEO Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison, former FTX co-founder Gary Wang and former FTX director of engineering Nishad Singh.

Cointelegraph contacted the SEC for comment but did not receive an immediate response.

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