SEC Seeks Court’s Assistance as Binance.US Refuses to Disclose Information
Binance.US, the American arm of global cryptocurrency exchange Binance Holdings Ltd., is facing increased scrutiny from the U.S. Securities and Exchange Commission (SEC) over allegations of regulatory non-compliance and potential violations of U.S. securities laws. This is part of a wider legal battle between the SEC and various Binance entities, including the parent company and its founder Changpeng Zhao.
The SEC’s lawsuit, which was filed last year, accuses Binance of a range of violations, such as mishandling customer funds and offering unregistered securities. One of the key issues being investigated is whether employees outside the U.S. had access to American customers’ assets, which would be a breach of regulatory requirements.
In a recent joint status report to a Washington, D.C. District Court, the SEC accused Binance.US, operating as BAM Trading Services, of failing to provide crucial information about the custody of customer assets. Despite a court order, Binance.US has allegedly been uncooperative with regulatory requests to prove control over these assets. The SEC is now seeking further discovery, including a targeted deposition, to address these concerns.
Binance.US has denied the SEC’s claims, stating that it has cooperated with document requests and provided evidence to support its control over customer assets. However, the SEC remains unsatisfied, alleging a lack of transparency and a refusal to address important inquiries about asset management. This clash between Binance.US and the SEC highlights the challenges faced by major cryptocurrency exchanges in navigating regulatory requirements, particularly during the current boom in the crypto market. The alleged failure of Binance.US to provide satisfactory answers to regulatory queries raises concerns about investor protection and market integrity.
In the aftermath of the SEC’s actions, Binance.US COO Christopher Blodgett revealed that the company has experienced significant staff reductions and asset withdrawals, leading to a decline in revenues of over 75%. These financial losses have further compounded the challenges faced by Binance.US.
In June, the SEC filed a lawsuit against Binance, Binance.US, and founder Changpeng Zhao, accusing them of selling unregistered securities and commingling customer assets with a separate company. Binance has agreed to a $4.3 billion settlement with the U.S. Department of Justice, acknowledging violations of money laundering and terrorism financing regulations. Zhao has also admitted to money laundering charges and is scheduled for a criminal sentencing hearing on April 3.
Overall, the intensified scrutiny from the SEC and the ongoing legal battle pose significant challenges for Binance.US and highlight the need for greater regulatory compliance in the cryptocurrency industry.