These 6 Crypto Money Companies Have Been Sued! So why?

Why did these 6 popular crypto firms come under the regulatory lens? Here are some of the more notable crypto companies that have been in dispute with regulators recently, and why.

Binance, the world’s largest cryptocurrency exchange

On March 28, Binance, the world’s largest exchange by volume, and the company’s CEO, Changpeng Zhao (CZ), were sued by the Commodity Futures Trading Commission for allegedly violating US trade laws. The lawsuit alleges that Binance offers unregistered crypto derivatives products and directs its US customers to avoid compliance checks by using VPNs.

The lawsuit also alleged that Binance has created a system to hide the entire scale of its operations, leading its clients to open shell companies to evade crypto restrictions. In addition, the CFTC accused Binance of operating an unregistered futures trading platform. Finally, the criminal complaint also states that Binance has not properly implemented KYC or anti-money laundering processes. CZ showed up to trash the accusations. However, financial services giant AB Bernstein has released a report stating that as part of the deal with the CFTC, Binance may close its US operations. “Binance will seek to protect its dominant international business,” said Gautam Chhugani, Bernstein senior analyst.

Justin Sun’s Tron

cryptocoin.comAs you follow, there has been a lot of discussion about whether crypto qualifies as a security that needs to be registered with the SEC. As no official decision has yet been made, there are a few gray areas about what qualifies as securities and what does not. On that front, the US SEC sued the Tron Foundation, its founder Justin Sun, the BitTorrent Foundation, and BitTorrent last week.


The lawsuit alleged that Sun offered and sold TRX and BTT tokens through unregistered programs and airdrops, and also manipulated TRX’s secondary market through token trading. Wash trading is an illegal way of trading securities to provide misleading information to the market. Court filings show that Sun’s subsidiaries engage in illegal trade and transfer money to trade. At this time, it is unknown how much Sun and its companies would have to pay if they lost to the SEC.

Another giant cryptocurrency exchange Coinbase

Coinbase, the largest US cryptocurrency exchange, has had its fair share of problems with regulators. Earlier this year, the exchange was ordered to pay a $50 million fine by New York State regulators following an investigation into the exchange’s compliance with anti-money laundering requirements. Authorities found that until 2018, Coinbase allowed customers to open accounts without adequate background checks. The fine paid was to speed up compliance efforts to stop potential criminals from using the exchange.


More recently, Coinbase received a Well’s notice from the SEC regarding the exchange’s staking service Earn, as well as Prime and Wallet products. Through staking, crypto holders can earn money by participating in the verification process of a Blockchain and even get amazing returns through returns. While cryptocurrency companies that do not provide staking services to the SEC are under investigation, a Well’s notice does not always result in a lawsuit.

And yet another cryptocurrency exchange Kraken

Another exchange that attracts attention with its staking service is the San Francisco-based crypto company Kraken. Last month, Kraken agreed to shut down its staking program and pay a $30M fine to the SEC for failing to register its program. The lawsuit explained that when investors provide service providers with tokens for staking, they lose control of those tokens and take risks with little protection. “Whether as a service staking, lending or otherwise, crypto brokers offer investment contracts in exchange for investors’ tokens, while securities must provide the appropriate disclosures and protections required by our laws,” said SEC Chairman Gary Gensler.

Prior to the $30 million fine, Kraken entered a feud with the US CFTC in September 2021. As such, it spent $1.25 million to clear US charges that it illegally offered certain transactions in digital assets, including Bitcoin. Two months later, Kraken paid nearly $400,000 for allegedly violating US sanctions laws by not preventing users in Iran from accessing its platform.

Binance USD (BUSD) issuer Paxos

Since the collapse of TerraUSD led to a market-wide drop in cryptocurrency prices, US regulators have been watching stablecoins closely. In February of this year, the SEC issued a Well’s notice to cryptocurrency firm Paxos Trust Co for issuing and listing Binance USD (BUSD). The SEC believes that the specified stablecoin qualifies as a unregistered security and therefore must be approved by the regulator before it is issued. In response, Paxos said that it will temporarily stop the issuance of BUSD tokens.

Finally, Custodia Bank

While not all businesses are the target of regulatory investigations, some, such as Custodia Bank, have faced challenges due to wider regulatory scrutiny. On February 27, the US Federal Reserve denied Custodia Bank’s Membership in the Federal Reserve System. A month later, the regulator reported that Custodia Bank was denied membership in the US Federal Reserve system due to its connection to crypto markets.

“Custodia had not yet developed an adequate risk management framework for its proposed crypto-asset-related activities and had not addressed the highly correlated risks associated with its undiversified business model,” the statement said. Also, if Custodia Bank agreed, as a member, the bank would have to forego crypto-related activities due to the volatile nature of virtual digital assets.

Implications for the cryptocurrency market

After the crypto industry fell to its knees with a year of disastrous losses and bankruptcies, crypto companies could hope for a recovery in 2023. Instead, businesses have had to deal with the wrath of US regulatory agencies, who seem more determined than ever before. However, this regulatory precedent can help establish a framework within which companies can operate safely and ethically for years to come.

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