The recent joint motion filed by the SEC on March 5 against Binance.US has brought to light various concerns regarding the exchange’s compliance with regulatory requests. The SEC alleges that Binance.US has not been conducting satisfactory inspections and has refused to answer crucial questions posed by the regulatory body. This lack of cooperation raises serious doubts about the transparency and accountability of Binance.US’s operations.
Another troubling aspect highlighted in the SEC’s filing is the claim that Binance.US has made significant changes to its operations without providing necessary updates to the SEC. This lack of transparency regarding operational changes can lead to regulatory violations and undermine the trust of customers and investors in the exchange.
The SEC’s initial allegations of securities violations against Binance and Binance.US in June 2023 have escalated into a legal battle that is causing “material damage” to the exchange, as claimed by Binance.US. The regulatory scrutiny and legal actions taken by the SEC have resulted in the loss of banking partners and active users, leading to a significant decline in revenues for the exchange.
One of the main concerns raised by the SEC is whether entities outside the US, such as Binance Holdings Limited, control certain Binance.US crypto wallets. The regulator is worried about the lack of complete autonomy in Binance.US’s control over customer assets, particularly regarding the access of Binance Holdings employees to these funds through Amazon Web Services servers. This raises questions about the security and exclusivity of customer assets held by Binance.US.
The SEC has requested the court to engage in additional discovery, including a targeted deposition, to further investigate Binance.US’s compliance with regulatory requirements. This would involve choosing a representative from Binance.US to provide sworn testimony about the exchange’s operations and control over customer assets. The SEC is also open to other more limited discovery methods to gather evidence and clarify the issues raised in the filing.
The legal battle with the SEC has taken a toll on Binance.US’s workforce, with over 200 staff members being laid off since June 2023. This amounts to two-thirds of the company’s workforce, indicating the severe impact of the regulatory actions on the exchange’s operations. The loss of employees, coupled with a significant decline in revenues, has created a challenging environment for Binance.US to navigate.
The ongoing legal battle between the SEC and Binance.US highlights the importance of regulatory compliance and transparency in the cryptocurrency industry. The allegations of securities violations, lack of control over customer assets, and the negative impact on company operations underscore the need for exchanges to prioritize regulatory requirements and maintain open communication with regulatory bodies. As the legal proceedings continue, it remains to be seen how Binance.US will address the concerns raised by the SEC and rebuild trust with its customers and investors.
