Key takeaways:
- According to Bloomberg, the Security and Exchange Commission is investigating Binance for its sale of BNB during the initial coin offering
- Binance raised $15 million in the ICO sale of 100 million BNB tokens in July 2017
- The investigation into the crowd sale campaign of BNB is reminiscent of the lawsuit against Ripple, which is being investigated for its potential unregistered sale of XRP
The Security and Exchange Commission is putting Binance’s 2017 ICO under the microscope
The United States Securities and Exchange Commission (SEC) is reportedly probing into the BNB initial coin offering that took place in 2017, to determine whether Binance’s self-reported utility token was in fact sold as a security.
As reported by Bloomberg on Monday, the exchange said it is working with the authorities, however, it was unwilling to share any further information about the subject.
As a reminder, Binance offered 100 million BNB for sale in the ICO, at a sale price of 2,700 BNB for 1 ETH (roughly $0.15 per token at the time). The company used the $15 million it raised during the 2017 crowdfunding campaign for marketing expenses and for platform optimization.
To determine whether the crowd sale of BNB was indeed an unregistered sale of a security, the SEC is following a precedent set nearly a hundred years ago in a landmark SEC v. Howey case, during which the criteria were set for what constitutes a security. This set of parameters later become known as the Howey Test.
BNB is not the only cryptocurrency being scrutinized by the US leading financial watchdog. Ripple’s XRP is also being examined as a potential security. Case in point, the SEC took Ripple executives to court last year, alleging they have enriched themselves by more than $600 million in the unregistered sale of XRP.
If XRP or BNB are identified as securities, the decision could have massive ramifications for the broader cryptocurrency market and the industry as a whole. Ripple CEO Brad Garlinghouse echoed this sentiment in a CNBC interview in mid-April: “This case is important, not just for Ripple; it’s important for the entire crypto industry in the United States.” He went on to add that if XRP is determined a security of Ripple, the SEC must “know every person that owns XRP.” “It’s not possible,” the CEO remarked.
