The recent joint motion filed by the SEC on March 5 shines a light on the ongoing battle between the regulatory body and Binance.US. The SEC has raised concerns about Binance.US allegedly failing to comply with regulatory requests for information on customer assets. According to the SEC, Binance.US’s inspections have been deemed insufficient, critical questions have been unanswered by company counsel, and the firm has made operational changes without providing necessary updates.
One of the main issues highlighted by the SEC is the potential lack of complete autonomy in Binance.US’s control over customer assets. The SEC is particularly concerned about the control of certain Binance.US crypto wallets by entities outside of the US, including Binance Holdings Limited. The regulator has raised questions about whether Binance Holdings employees have access to customer funds through Amazon Web Services servers that support Binance.US’s wallet software. This has raised doubts about the firm’s exclusive control over private keys and, consequently, customer assets.
In response to these concerns, the SEC has requested the court to engage in additional discovery, including a targeted deposition. This would require Binance.US to provide a representative to give binding testimony on the matter. The SEC has also expressed openness to other more limited discovery methods to shed light on the situation. Meanwhile, Binance.US has requested the court to halt the expedited discovery process, claiming that it has fully complied with the regulator’s demands.
The ongoing legal battle with the SEC has taken a toll on Binance.US’s operations. COO Christopher Blodgett testified that the company has been forced to cut more than 200 staff members, which amounts to two-thirds of the company, since June 2023. This drastic measure was taken as users withdrew $1 billion in assets from the exchange. Blodgett highlighted that Binance.US’s revenues have plummeted by more than 75% following the SEC’s actions, all while operating and legal costs continue to rise.
The SEC’s recent actions against Binance.US paint a picture of a regulatory body that is deeply concerned about the control and autonomy of customer assets by the exchange. The ongoing legal battle has not only strained the relationship between Binance.US and the SEC but has also had tangible impacts on the company’s operations, resulting in significant staff cuts and a sharp decline in revenues. The coming days will reveal how this battle unfolds and the implications it may have on the wider cryptocurrency industry.
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