Recently, the SEC filed a joint motion against Binance.US, accusing the company of failing to comply with regulatory requests for information on customer assets. The SEC claims that Binance.US’s inspections have been inadequate, their counsel has refused to answer critical questions, and the firm has made changes to its operations without providing updates. On the other hand, Binance.US argues that they have fully complied with all information requests and that the SEC’s actions have caused them “material damage.”
The SEC first raised securities violation allegations against Binance and Binance.US back in June 2023. The regulator is particularly concerned about whether entities outside the US, such as Binance Holdings Limited, control certain Binance.US crypto wallets. The SEC worries that Binance Holdings employees may have access to these funds through Amazon Web Services servers, raising doubts about the firm’s autonomy over customer assets.
The SEC has also expressed concerns about the presence of Binance.US personnel outside the US who are compensated by global Binance entities. The regulator wants to ensure that Binance.US properly monitors and blocks prohibited transfers to international entities associated with Binance.
The SEC has requested the court to engage in additional discovery, including a targeted deposition where Binance.US would have to provide a representative for binding testimony. The agency has also expressed openness to other, more limited discovery methods. In response, Binance.US has asked the court to end the expedited discovery process, claiming full compliance with the SEC’s demands and arguing that the SEC’s actions have led to significant damage.
Binance.US has reported substantial setbacks following the SEC’s actions. The company’s COO, Christopher Blodgett, revealed that over 200 employees, two-thirds of the company, were laid off since June 2023 as users withdrew $1 billion in assets from the exchange. Blodgett stated that Binance.US’s revenues plummeted by more than 75% after the SEC’s actions, coupled with increasing operating and legal costs.
The legal battle between the SEC and Binance.US is far from over. Both parties continue to present their arguments and counterarguments in court. The outcome of this case will not only impact Binance.US but also set a precedent for how regulatory bodies interact with cryptocurrency exchanges. It remains to be seen how this conflict will unfold and what implications it will have for the broader crypto industry.