The U.S. Securities and Exchange Commission (SEC) has intensified its scrutiny of Binance.US, the American arm of global cryptocurrency exchange Binance Holdings Ltd., amid allegations of regulatory non-compliance and potential breaches of U.S. securities laws. This comes as part of a broader legal battle between the SEC and Binance entities, including the parent company and its founder, Changpeng Zhao.

Binance Entangled in a Web of Deception

The SEC’s lawsuit, filed last year, slapped Binance with a range of violations, including mishandling customer funds and offering unregistered securities. At the heart of the investigation is whether employees outside the U.S. had access to American customers’ assets, a situation that could violate regulatory requirements.

In a recent joint status report to a Washington, D.C. District Court, the SEC accused Binance.US, operating under the name BAM Trading Services, of failing to provide crucial information regarding the custody of customer assets. The SEC says Binance.US has been “unable or unwilling” to cooperate with regulatory requests to prove control over these assets, despite a court order.

The SEC seeks further discovery to address these issues, including a targeted deposition.

After Denial, Binance Cries Financial Losses

Rebuffing the SEC’s Claims, Binance.US said that it cooperated with document requests and the provision of evidence supporting its control over customer assets. However, the SEC remains unsatisfied, alleging a lack of transparency and an unwillingness to address key inquiries regarding asset management.

This regulatory clash came at a time when the Crypto market is at boom, underlining the challenges faced by major exchanges in navigating regulatory waters. Binance.US’s alleged failure to provide satisfactory answers to regulatory queries has raised concerns about investor protection and market integrity.

Meanwhile, post-SEC actions, Binance.US COO Christopher Blodgett testified that a drastic staff reduction of over 200 happened since June 2023, coincided with $1 billion in asset withdrawals. Revenues plunged by over 75% amidst escalating costs.

So far in the Case…

In June, the SEC filed a lawsuit against Binance, Binance.US, and founder Changpeng “CZ” Zhao for allegedly selling unregistered securities and mixing customer assets in a different company. Binance agreed to a $4.3 billion settlement with the U.S. Department of Justice, acknowledging breaches of money laundering and terrorism financing regulations. Zhao admitted to money laundering charges and is scheduled for a criminal sentencing hearing on April 3.

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