It’s only Wednesday, and the Securities and Exchange Commission (SEC) has launched a war on the two largest crypto exchanges — Binance and Coinbase (NASDAQ:COIN).

Their weapon of choice: lawsuits.

The casualties:COIN

falling nearly 20% in the past two days.

Heart of the issue

Binance: The SEC alleged that the company “engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” including:

• Commingling customer deposits: Separate entities owned by or related to Binance’s founder CZ had access to billions in customer funds.
• Offering unregistered securities: Offered unregistered crypto tokens, including its own BNB token and BUSD stablecoin.

Coinbase: The SEC alleged that the company is operating as an unregistered exchange and broker — and wants it to forgo “ill-gotten gains.” If Coinbase were to cease part of its US operations, analysts think that over 30% of its revenue could be at risk.

Are your funds safu?

Binance defended itself and said “the lawsuit is baseless” and would “vigorously” defend itself. Within 24 hours, investors withdrew nearly $800M from Binance after the charges — except that’s only a small fraction of its total deposits.

For some, it brings back memories of FTX’s collapse — whose founder SBF was found to be diverting funds between the crypto exchange and his hedge fund Alameda Research. And we all know how that ended.