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What the lawsuits say and how investors in cryptocurrency have responded

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    It’s been a frantic week in crypto, with the U.S. securities regulator suing both Binance and Coinbase for allegedly violating U.S. laws. Bitcoin took a hit in turn, falling to its lowest level since March

    The U.S. Securities and Exchange Commission this week brought long-awaited cases against Binance and Coinbase, alleging that the platforms violated U.S. securities laws.

    The regulator sued Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao on Monday, alleging the exchange artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.

    The SEC also claimed that Binance and Zhao, its billionaire founder and one of the crypto industry's highest-profile moguls, secretly controlled customers' assets, allowing them to commingle and divert investor funds "as they please."

    The exchange created separate U.S. entities "as part of an elaborate scheme to evade U.S. federal securities laws," the SEC also alleged, citing a number of practices first reported by Reuters in a series of investigations into the exchange published this year and in 2022.

    In a statement, Binance said it had "actively cooperated" with the SEC "from the start,” and intends to defend its platform “vigorously.”

    Investors pulled around $1.43 billion from Binance and its U.S. affiliate as of 11 a.m. ET (1500 GMT) on Tuesday, data firm Nansen said.

    The SEC also sued Coinbase on Tuesday, accusing the largest U.S. cryptocurrency exchange of operating illegally without having first registered with the agency. In a complaint filed in Manhattan federal court, the SEC said Coinbase has since at least 2019 made billions of dollars by handling cryptocurrency transactions, while evading the disclosure requirements meant to protect investors.

    The lawsuit addressed several aspects of Coinbase's business, including Coinbase Prime, which routes orders; Coinbase Wallet, which lets investors access liquidity; and the Coinbase Earn staking service.

    Coinbase’s chief legal officer Paul Grewal said in response to the lawsuit that the “SEC's reliance on an enforcement-only approach” is harming American competitiveness as well as companies like Coinbase.

    Crypto essentials
    * Crypto shares tumble: Bitcoin, the world’s largest cryptocurrency, and crypto-related stocks plunged after the SEC sued Binance in the regulator’s latest crackdown on the digital asset ecosystem. Experts say that this week’s latest move could prompt companies to increase compliance, spike products and expand overseas.

    * Musk and Dogecoin: Investors are accusing Elon Musk of manipulating the price of the cryptocurrency Dogecoin in a lawsuit filed May 31 in Manhattan federal court. They say Musk used Twitter posts and paid online influencers to profitably trade Dogecoin via wallets that he or his company Tesla controlled.

    * Cboe gets CFTC nod: Exchange operator Cboe Global Markets on Monday received regulatory approval from the U.S. Commodity Futures Trading Commission to offer leveraged derivatives products on its digital trading platform, including physically and financially settled bitcoin and ether margined futures contracts.

    Bitcoin has been uncommonly quiet over the past four weeks, despite major market-moving news such as the end of the U.S. debt ceiling saga.

    Bitcoin's volatility index is near 64, well below the 2023 peak of 116.5 touched in January, according to CryptoCompare. Overall daily cryptocurrency spot trading volumes - above $20 billion for most of the year - have languished at around $10.6-$12 billion in the last two weeks, data from The Block shows.

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