Jai Sahu
The US branch of Binance collapsed after facing charges from the SEC for breaking securities laws, stated by the company’s COO, Christopher Blodgett.
In a deposition revealed on December 15, Blodgett mentioned that the lawsuit from the SEC dealt a critical hit to the branch, forcing it to terminate over 200 employees since June, which is roughly two-thirds of its workforce.
The SEC filed a lawsuit against Binance in June of the previous year, including its co-founder Changpeng Zhao and BAM Trading, which manages the US arm of Binance, accusing them of offering BNB and BUSD without proper registration. Moreover, BAM Trading’s staking program was labeled as an investment contract and thus considered a security by the SEC.
Despite settling with the Department of Justice and the Commodity Futures Trading Commission for $4.3 billion over different violations in November, Binance’s issues with the SEC remain unsettled.
Massive Withdrawals from Binance.US Following SEC Action
After the SEC sought a temporary restraining order to halt fund movements until it was proven that neither Binance nor Zhao could access them, around $1 billion in assets was withdrawn from Binance.US, Blodgett noted. He also mentioned that these allegations greatly reduced the platform’s credibility among institutions.
“Before the restraining order, we had more than 20 market makers. After the order, the number dwindled to less than five,” he remarked.
Post-restraining order, Binance.US has seen the loss of two banking partners without finding any replacements. The company’s revenue plummeted by over 75%, with operating costs rising and legal fees reaching around $10 million, Blodgett added.
Allegations of Non-Compliance by Binance.US
Furthermore, the SEC accused Binance.US in recent court documents of not complying with requests for information regarding customer assets among other issues.
Investigations revealed inconsistencies in BAM’s initial compliance claims with the Consent Order, said SEC lawyers. Adjustments to procedures and controls were not properly reported, making it difficult to assess compliance, leading to delays and partial information that obstructed the investigation, according to the document.