SEC Plans to Sue Paxos After Clampdown on BUSD

The Securities and Exchange Commission (SEC) has indicated interest to file a lawsuit against Paxos, the producer of Binance USD for violating investor protection laws after the regulator had already ordered Paxos to stop minting BUSD.

Citing people familiar with the matter, the Wall Street Journal reported that a “Wells Notice” has already been served to Paxos, meaning that the stablecoin issuer will now need to gear up for the coming lawsuit.

Investors King understands that BUSD is a stablecoin pegged to the US Dollar. Developed by both Binance and Paxos, it is the third-largest stablecoin by market capitalization.

According to a report from Wall Street Journal, SEC is alleging that BUSD is unregistered security, thereby, making it unsuitable for public consumption. 

The Securities and Exchange Commission believes that BUSD is a security and that Paxos failed to register it with the agency before offering it for sale in September 2019.

Following the news of SEC’s intentions, Paxos said it would halt the minting of new BUSD tokens. A development some crypto maximalists saw as a win for the US Securities and Exchange Commission as the regulatory body takes a more aggressive step against cryptocurrency. The securities watchdog has been swift in its desire to bring crypto players under control.

It would be recalled that last week, the Securities and Exchange Commission also stretched its light on Kranken, a major cryptocurrency exchange in the United States, leading to a settlement of $30 million.  

Announcing the clampdown on BUSD, the Chief Executive Officer, (CEO) of Binance, C Z also tweeted stating that  “We were informed by Paxos they have been directed to cease minting new BUSD [Binance’s stablecoin] by the New York Department of Financial Services,” Zhao said on Twitter.

Meanwhile, the spokesperson for Pasox has confirmed the readiness of the company to pursue the case within the ambit of the law if need be. “We will engage with the SEC staff on this issue and are prepared to vigorously litigate if necessary”.