Crypto Firm Paxos Poised To Face SEC Lawsuit Over $16B Binance USD Token Minting

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  • The Securities and Exchange Commission plans to sue the crypto firm Paxos Trust Co for violating investor protection laws.
  • The SEC’s enforcement staff issued a letter to Paxos, a Wells notice, to inform companies and individuals of a possible enforcement action.
  • Paxos Trust has been directed to cease minting a Binance-branded token that ranks as the third-largest stablecoin, according to Bloomberg, with a market value of $16 billion.
  • Also Read: Binance Temporarily Stops USDC Withdrawals As Investor Concerns Over Reserves Mount.
  • The notice alleges that Binance USD, a digital asset Paxos issues and lists, is unregistered security, reported Wall Street Journal.
  • “Paxos has informed us that they have been directed to cease minting new BUSD by the New York State Department of Financial Services,” a Binance spokesperson said.
  • “BUSD is a stablecoin wholly owned and managed by Paxos,” the spokesperson said. “As a result, the BUSD market cap will only decrease over time. Paxos will continue to service the product, manage redemptions, and will follow up with additional information as required. Paxos also assured the funds are safe, and fully covered by reserves in their banks.”
  • It couldn’t be determined if the SEC notice is related explicitly to Paxos’ issuing of the coin, the listing of the coin, or both.
  • Binance said BUSD is issued and owned by Paxos, and it only licenses its brand. “We will continue to monitor the situation,” it said.
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