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On Monday, June 5, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its founder Changpeng Zhao, charging them on several grounds including breaching securities regulations and commingling billions of dollars worth of investors’ funds, while “placing investors’ assets at significant risk”.

Zhao denied the SEC’s charges on Twitter, adding the company will issue a response once it sees the regulator’s complaint.

Meanwhile, a number of crypto investors have flocked to support the world’s biggest digital assets exchange, according to widely-followed reporter Wu Blockchain.

Notably, digital assets management firm FBG Capital deposited 44 million USDT in Binance, mitigating potential liquidity risks. However, before the SEC’s lawsuit was reported, FBG withdrew 35 million USDT from Binance, meaning the net deposits amounted to just 9 million USDT.

At the same time, machibigbrother.eth, a popular NFT investor, said it has transferred all BAYC and MAYC NFTs to Binance to show support, worth around 2,900 ETH, or $5.26 million.

SEC’s lawsuit triggers $700m+ in outflows from Binance

Although several prominent investors expressed support for Binance, the SEC’s legal action still led to notable outflows from the leading crypto exchange.

According to blockchain analytics firm Nansen, netflows on the Binance exchange fell to -$778 million over the 24-hour period.

On a similar note, the exchange suffered roughly $503 million in net outflows on June 5, as per data by Dune Analytics.

Specifically, the chart shows that investors have pulled out over $1 billion worth of crypto assets from Binance, against $546 million in deposits. These figures mean that Binance is heading for the largest daily net outflows since mid-March, when the crypto industry was plagued with withdrawals triggered by collapses of multiple crypto-friendly banks.

Crypto market sentiment returns to ‘fear mode’

Meanwhile, crypto expert Ali Martinez said the crypto market sentiment “is back into “fear” mode” following the SEC’s action.

However, the expert offered words of encouragement for crypto investors, urging them to “be greedy when others are fearful!”

Major cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), and XRP (XRP) lost more than 4.1%, 2.9%, and 4.6% on the day amid the broader market slump.