Cryptocurrencies sink on SEC’s Lawsuit Against Binance

The Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and its founder Changpeng Zhao, alleging that the exchange violated securities laws and misused investor funds. The lawsuit caused a significant downturn in the cryptocurrency market, with Bitcoin down by -5.90%, Ethereum down by declining by about -5%, and Binance’s token, BNB retreating by -9.64 dip within the first hour after the court filing. The overall market capitalization for cryptocurrencies also decreased by around 4.5% during this period.

The SEC’s lawsuit asserted that certain prominent cryptocurrencies, including Solana, BNB, Cardano are securities. This classification has significant implications for the crypto industry as it may discourage brokers from offering these tokens, potentially impacting their liquidity and price.

In the past 24 hours, Binance witnessed $69 million in trading outflow following the news of the lawsuit. In contrast, shares of Coinbase, the largest US exchange, experienced double-digit declines 3. The stock price initially dropped nearly 12% from its Friday close but has since recovered slightly, currently showing a 10.3% decrease at $57.91.

This is not the first legal challenge faced by Binance. The Commodity Futures and Trading Commission (CFTC) previously sued the exchange and Zhao in March for allegedly violating CFTC rules. Similar to the recent SEC lawsuit, the announcement of the CFTC case also triggered price drops for several top cryptocurrencies.

The Securities and Exchange Commission (SEC) has expanded its list of alleged securities to include Filecoin, the Sandbox and Algorand.

On a different note, DYDX, the governance token for the decentralized exchange platform of the same name, witnessed a surge to $2.23 in response to the SEC’s lawsuit, representing an approximately 10% gain from its lowest price of $2.04 within the past 60 minutes.