Banks Withdraw Support and Strangle Business as Binance.US COO Attributes it to SEC Lawsuit
Binance.US, the American branch of the global cryptocurrency exchange Binance, has encountered significant operational disruptions due to legal challenges from the United States Securities and Exchange Commission (SEC).
The SEC filed a lawsuit in June of last year, accusing Binance, Binance.US, and its founder Changpeng Zhao of various activities, including selling unregistered securities. As a result, the company’s workforce was drastically reduced, with over 200 employees being laid off and the firm’s revenues experiencing a sharp decline.
In a deposition in December, Christopher Blodgett, the Chief Operating Officer of Binance.US, revealed the impact of the SEC’s lawsuit. He stated that the legal action had severely damaged the company’s relationships with banking institutions, making it difficult to conduct transactions in U.S. dollars. Blodgett described the company as “radioactive” to banks, as being associated with Binance.US could lead to scrutiny from the SEC.
The legal battles not only affected staffing and banking relationships but also the company’s market position. Blodgett disclosed that customer assets on the platform decreased by approximately $1 billion shortly after the SEC’s legal action.
The loss of banking support and the inability to find new banking partners have effectively crippled the business. Prior to the lawsuit, Binance.US collaborated with over 20 market makers, but this number has now fallen to less than five, indicating a loss of institutional trust.
Furthermore, the SEC’s accusations against Binance.US include engaging in wash trading to artificially inflate trading volumes and commingling user funds in an account linked to Zhao at Merit Peak.
The regulatory body also expressed concerns about the potential transfer of customer funds offshore, leading to a temporary restraining order (TRO) to freeze Binance.US’ assets. However, a judge dismissed this TRO the following day.
In a related development, Binance, Binance.US, and Zhao reached a settlement with the Department of Justice, Treasury, and the Commodity Futures Trading Commission in November, agreeing to pay $4.3 billion for violating money laundering and terrorism financing laws. Despite this settlement, the SEC is continuing its investigation and maintaining its charges against the cryptocurrency exchange.
Zhao is scheduled to face a sentencing hearing on April 3 after pleading guilty to a charge of money laundering, with a possible sentence of up to 18 months in prison.
