(Reuters) — Binance, the world’s largest crypto exchange,  and its CEO, Changpeng Zhao, operated a “web of deception” that included artificially inflating its trading volumes and diverting customer assets, the U.S. Securities and Exchange Commission alleged Monday.

The agency sued Binance and Mr. Zhao for failing to restrict U.S. customers from its platform and misleading investors about its market surveillance controls, as well as for operating an unregistered securities exchange.

The SEC’s complaint, filed Monday in federal court in Washington, D.C., also alleges that Binance and Mr. Zhao secretly control customers’ assets, allowing them to commingle and divert customer funds, and that Binance created separate U.S. entities “as part of an elaborate scheme to evade U.S. federal securities laws.”

The SEC also alleged that from at least September 2019 until June 2022, Sigma Chain, a trading firm owned and controlled by Mr. Zhao, engaged in wash trading that artificially inflated the trading volume of crypto asset securities on the Binance.US Platform.

"We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” SEC Chair Gary Gensler said in a statement.

Binance did not immediately respond to a request for comment on the charges. In a tweet, Mr. Zhao said Binance would issue a response once it has reviewed the SEC's complaint, and said the exchange's team is “standing by, ensuring systems are stable, including withdrawals, and deposits.”

The move is the latest in a series of legal woes for Binance, which was also sued by the U.S. Commodity Futures Trading Commission in March for operating what the regulator alleged were an “illegal” exchange and a “sham compliance program, with Zhao calling those charges “disappointing” and an “incomplete recitation of facts.”

Binance is also under investigation by the Justice Department for suspected money laundering and sanctions violations, according to people familiar with the probe.