The recent joint motion filed by the SEC on March 5 against Binance.US has brought to light issues surrounding regulatory compliance. The SEC alleges that Binance.US has failed to fully comply with information requests on customer assets, citing insufficient inspections, refusal to answer critical questions, and changes to operations without updates. On the other hand, Binance.US claims to have met all the regulator’s demands and argues that the SEC’s actions have caused “material damage” to the firm.
Concerns on Securities Violations
The SEC initially accused Binance and Binance.US of securities violations in June 2023, leading to a temporary restraining order against Binance.US. The regulator’s main concern revolves around the control of certain Binance.US crypto wallets by entities outside the US, particularly Binance Holdings Limited. Questions have been raised about the autonomy of Binance.US’s control over customer assets, especially regarding access to funds by Binance Holdings employees through Amazon Web Services servers. This raises doubts about the firm’s control over private keys and customer assets.
The SEC has requested the court to engage in further discovery, including a targeted deposition, to clarify the control and monitoring of customer assets by Binance.US. The agency is also open to other limited discovery methods to resolve the regulatory concerns. Meanwhile, Binance.US has asked the court to halt the expedited discovery process, claiming full compliance with demands. The company argues that the SEC’s actions have resulted in significant damage, leading to the loss of banking partners, active users, and ultimately, employee layoffs.
Binance.US COO Christopher Blodgett’s testimony revealed the financial repercussions of the SEC’s actions on the company. More than 200 staff, two-thirds of the workforce, have been laid off since June 2023 as users withdrew $1 billion in assets from the exchange. Blodgett mentioned that Binance.US revenues have “imploded” following the SEC’s actions, plummeting by over 75% amidst increasing operational and legal costs.
The ongoing dispute between the SEC and Binance.US underscores the importance of regulatory compliance in the cryptocurrency industry. The allegations of securities violations and concerns around customer asset control have raised significant challenges for Binance.US. As the legal battle continues, the financial impact on the company serves as a stark reminder of the consequences of regulatory non-compliance in the digital asset space.
Leave a Reply