Cardano (ADA) A Security? Price Collapses On SEC v. Binance Lawsuit

Cardano (ADA) and the crypto market just took a punch from the U.S. Securities and Exchange Commission (SEC). The regulator filed a lawsuit against Binance and its CEO, Changpeng Zhao, contributing to the decline in prices across the nascent market.

Cardano (ADA) trades at $0.35 as of this writing, recording a 6% loss in the last 24 hours. In the last week, the cryptocurrency recorded a 7% and stands amongst the worst performers in the top 10 by market capitalization, only surpassed by Binance Coin (BNB).

SEC Fight Against Binance Splashes Cardano (ADA)

According to the complaint filed by the U.S. regulator in the District of Columbia, Binance has been offering “unregistered securities” since its inception. These alleged securities under U.S. laws include Cardano (ADA), Polygon (MATIC), Solana (SOL), Filecoin (FIL), Cosmos Hub (ATOM), Algorand (ALGO), and others.

On the document, the SEC classifies ADA as a “crypto security,” a term which they coined in the last two years. The regulator provides an overview of the token’s history, claiming the following and potentially arguing against ADA’s decentralization:

Today, three entities are responsible for Cardano: (1) the Cardano Foundation, a Swiss entity that is the legal custodian of the Cardano protocol and owner of its brand; (2) IOHK, an engineering company controlled by Hoskinson and Wood responsible for designing, building and maintaining the Cardano blockchain; and (3) Emurgo (…).

To sustain their argument, the SEC claims that these entities hold over 16.7% of ADA’s total supply or 31.1 billion ADA. The regulator also claims that the companies sold the token to fund development, marketing, business operations, and other critical project areas.

As of this writing, there is no official reply from these entities, or IOHK (IOG), the company behind Cardano’s development.

Crypto Market Participating Over-reacting To Binance Lawsuit?

Despite the lawsuit, some crypto community members call the event a “nothing burger.” The U.S. regulator is still to provide a clear legal framework for what constitutes a security in this country. In that sense, legal expert Collins Belton believes that today’s bad news could turn into a positive development for the long haul.

Via his Twitter account, the expert stated:

(…) this should actually be seen as a bit of a tension reliever for anyone that hasn’t been wildly deluded on Hopium. This complaint has been hanging above us like a sword of Damocles and letting it fall now in the depths of a bear is probably the best we could hope for.

Belton also believes the crypto market could be “overstating” the complaint. The lawsuit could finally release tension from key actors in the sector in the future, but in the short term, “not much change from status quo,” the expert concluded.

$1.5 Trillion Asset Manager Franklin Templeton Bets Big On Bitcoin

Franklin Templeton, one of the world’s largest asset managers with over $1.5 trillion in assets under management, plans to invest heavily in Bitcoin as well as its underlying technology.

This strategy was revealed by Sandy Kaul, the Senior Vice President of Franklin Templeton’s burgeoning crypto business, during a Sunday interview with Scott Melker, host of the Wolf Of All Streets podcast. 

Discussing how Franklin Templeton entered the digital asset space, Kaul explained that the company was intrigued by the technology behind Bitcoin and had decided to experiment on blockchain to bring operational efficiency and cost savings for its businesses.

As such, the company commenced research on individual coins, created multi-coin portfolios, and even invested in various crypto firms through a dedicated venture capital fund created in 2021.  Furthermore, she disclosed that Franklin Templeton operates its node operations to gain a comprehensive understanding of the Bitcoin network and its growth.

Kaul also emphasized that Franklin Templeton’s interest in crypto extends beyond Bitcoin. She highlighted the vast opportunities presented by the cryptocurrency’s blockchain and expressed her belief in investors exploring emerging opportunities.

“I think one of the issues we have right now is that people fixate too much on just Bitcoin and oftentimes don’t think about the broader ecosystem….Bitcoin is a huge Innovation, and we think it’s going to have massive opportunities in the future,” said Kaul.

Kaul also predicted a continued surge in institutional investors dabbling with cryptocurrencies, particularly Bitcoin. She highlighted the cyclical nature of the crypto market, with waves of bull markets occurring every few years since 2011.

According to her, institutions prefer to enter the market when prices are low, and the sector is not in the spotlight. Thus, the current crypto winter was a period in which institutions strategically positioned themselves in the market, similar to the gradual adoption of alternative assets that took around 10 to 15 years. Furthermore, Kaul emphasized the importance of institutional involvement in creating a solid foundation for the market, which would play a crucial role in propelling cryptocurrencies to new heights following substantial price declines.

“I know they’re not worried about the price. They salivate at low prices…If you’ve seen Bitcoin go to $69,000 and you see it at $15,000, you know $69,000 can happen again.” She added.

That said, as Franklin Templeton commits to investing further in Bitcoin and the broader crypto ecosystem, the asset manager joins prominent hedge funds, such as Grayscale Investments, Ark Invest and Pantera Capital, that have already made substantial investments in the space.

Furthermore, with Franklin Templeton’s commitment to education and promotion alongside its investment activities, mainstream acceptance of digital assets in investment portfolios will likely accelerate.

Binance Exposed For Allegedly Controlling U.S. Affiliate’s Bank Accounts

Binance’s alleged control over its US affiliate’s finances has come under the spotlight again following the revelation that a senior executive, Guangying Chen, was the main operator of five bank accounts belonging to Binance.US, including one that held American customers’ funds. 

According to a Reuters report, Silvergate Bank authorized Chen to operate these accounts in 2019 and 2020, according to bank records, giving her team exclusive control over the funds. Binance.US has denied that its parent company controlled its bank accounts, but the newly disclosed bank records and messages suggest otherwise.

Secret Access To U.S. Affiliate’s Bank?

According to Reuters, the latest findings suggest that the company exercised “tight control” over Binance.US’s finances, despite both companies insisting that they operated independently. The bank records and messages show that the exchange’s management over the U.S. business’s finances extended across its bank accounts at Silvergate and detail how this secret access was granted.

Binance.US’s head of legal, Krishna Juvvadi, told Reuters in April that employees of Binance.US’s operator, BAM Trading, had “exclusive control” over the bank accounts since its founding in 2019. However, in response to questions for this article, a Binance.US spokesperson said that no one other than Binance.US officials had control or access to the accounts since the company’s current CEO took over in late 2021.

Furthermore, earlier this year, Reuters reported that a deputy of Chen’s had access to one Binance.US Silvergate account, which transferred more than $400 million in 2021 to a trading firm controlled by Zhao. Binance.US denied any wrongdoing and said the trading firm was withdrawing its funds. However, Reuters reported on May 23 that Binance commingled its customers’ funds with its corporate revenues, in breach of U.S. financial rules that require client money to be kept separate.

Binance Legal Woes Deepen

The U.S. operations of one of the world’s largest cryptocurrency exchanges have been under increased scrutiny by regulators. In March, the Commodity Futures Trading Commission (CFTC) charged the exchange and its CEO, Changpeng Zhao, with willful evasion of commodities laws. Furthermore, the CFTC accused the exchange of “intentionally structuring entities” to avoid U.S. regulations designed to protect investors. Zhao called the charges an “incomplete recitation of facts.” 

In light of these irregularities spotted by the US regulators, the Securities and Exchange Commission (SEC) has filed a sweeping case against Binance, accusing it of mishandling customer funds and lying to regulators and investors about its operations, as reported by Bitcoinist. 

The recent SEC complaint against the exchange has significantly impacted the cryptocurrency market, with most top cryptocurrencies experiencing a sharp decline in value. BNB is a prime example of this trend, as its value has dropped by 8% in just a few hours of trading, falling from over $300 to $279.