The net value of Coinbase & Binance CEOs Brian Armstrong and Changpeng Zhao (CZ) has taken a significant hit as a result of the US SEC lawsuit against the companies. Almost 30 hours after the Securities and Exchange Commission (SEC) sued Binance on June 5 and Coinbase on June 6, Armstrong’s wealth was reduced by $289 million and Zhao’s by $1.33 billion.
Zhao, the most wealthy man in the cryptocurrency business and the 54th richest individual worldwide, had his total assets drop 5.1% this week to $26 billion. As the Binance CEO’s wealth has increased by more than 106% this year, he is still more than 73% lower than his peak net value of $96.9 billion in January 2022.
Armstrong is the 1,409th most wealthy individual in the world, and his total wealth has dropped 11.8% to $2.2 billion as a result of the SEC’s newest action. The Coinbase CEO has taken advantage of the benefits of a market return this year, resulting in a 61% enhancement in his wealth.
With the current drop, Zhao and Armstrong’s wealth has increased significantly more than the 9% so far gain for others.
Coinbase & Binance CEOs Fall Hits at the Core of the Crypto Sector
The SEC has charged Binance and Coinbase for mishandling client cash, deceiving investors and authorities, and violating securities laws. The move increases the regulatory pressure on the world’s biggest digital asset trading market. It’s also an additional setback for cryptocurrency after a drop in 2022 that helped competitor FTX’s demise after a slew of fraud claims.
The market confronts a difficult challenge in restoring confidence, and in the meantime, investors are shifting their focus to subjects such as artificial intelligence firms. The total value of the digital currency has fallen to $1.1 trillion from a high of more than $3 trillion in 2021 when massive support spurred a pandemic-era rise in tokens like Bitcoin.
Jane Street Association, Jumping Trading, and other big trading businesses have exited the cryptocurrency market in the United States due to increased scrutiny from regulators. The resulting lack of liquidity might make it difficult for investors to enter and exit digital-asset transactions promptly.
Crypto Market is Extremely Distinct
“The marketplace will be entirely distinct in a year,” Markus Thielen, Matrixport’s head of research, said in a letter. “Trading is expected to fall more, putting difficulties with market operators’ for profit expectations. Crypto in the United States will keep going through a nuclear winter.”
The SEC named 12 cryptocurrencies as assets that come within its jurisdiction in the lawsuit, bringing the total value of tokens considered unregistered securities to more than $115 billion. This indicates that tight restrictions must be followed, which may make the tokens more difficult to trade if exchanges refuse to list them.
The value of digital assets on Tuesday saw a significant decline as a result of the lawsuit. Since the case was filed on Monday, the price of the top 100 cryptocurrencies has dropped nearly 4%. Bitcoin, the most valuable token, has approached the $25,000 mark.
Based on Dune Analytics data from exchange-traded products maker 21Shares AG, the total net outflows from the Binance exchange hit $702 million on Monday, the largest since February.
Binance termed the SEC’s decision “disappointing,” adding that it was involved in good-faith conversations with the government to resolve the situation.
The SEC said that Coinbase has been operating as an unlicensed brokerage since the beginning of 2019 with its exchange platform, premium brokerage, and crypto wallet use, which keeps the client’s assets on its behalf. Assets offered on these platforms comprised securities, according to the regulator, “bringing Coinbase’s activities firmly within the remit of the securities laws.”
According to Gensler, “Coinbase’s accused failures deny investors of vital security measures, such as rule manuals that prohibit manipulation and fraudulent activity, proper communication, protections against disputes of interest, and regular SEC monitoring.” The lawsuit and the reduction in net worth of Coinbase & Binance CEOs have had a significant impact on the crypto market as a whole.
Growth and Crash of Two Major Exchanges
Binance, the world’s top cryptocurrency exchange, and Zhao were charged with thirteen charges by the SEC. Binance’s worldwide exchange, its US exchange, and Coinbase together control 50.6 percent of the cryptocurrency trading market.
According to several cryptocurrency specialists, the industry is currently undergoing an expected, though state, rise and fall cycle. They refer to Bitcoin’s 56% rally this year as proof that recovery is beginning.
As early as March, SEC officials officially stated that “Binance was functioning as an unregistered securities exchange, so we suspected this day could arrive soon,” Noelle Acheson, author of the Crypto Is Macro Now newsletter, wrote. “To a certain extent, we felt satisfied that this kingdom has now fallen.”
Outside of the United States, cities such as Hong Kong and Dubai are attempting to attract cryptocurrency investment. In April, the European Union passed the most sweeping digital-asset regulations of any industrialized country.
This might make it easier for crypto businesses to rebound from a severe recession and learn from the experiences of last year’s meltdown. “The clarity on regulations in the US is going to drive crypto to different regions globally,” said Cici Lu, founder of blockchain advisor Venn Link Partners.
The SEC complaint is the latest legal headache for Coinbase, which recorded $3.1 billion in net sales last year. In January, the business struck a deal worth $100 million with New York regulators over money-laundering security failings.
The SEC filed a lawsuit against the two biggest crypto exchanges, charging that the platforms violated multiple securities laws, especially by providing cryptocurrencies that the agency deems to be securities that are not registered. This has highly impacted the Coinbase & Binance CEO’s wealth.
After the cases, the SEC has now classified 67 cryptocurrencies as securities. Binance and Coinbase have both stated that they will fight themselves against the lawsuits filed against them.