The Securities and Exchange Commission (SEC) recently filed a joint motion requesting the court to take additional action against Binance.US. The SEC claims that the exchange has failed to comply with regulatory requests for information on customer assets. They argue that Binance.US’s inspections have been insufficient, critical questions have been left unanswered, and the firm has made operational changes without providing updates.
Binance.US’s Defense
On the other hand, Binance.US asserts that they have fully complied with all of the regulator’s information requests. They argue that the SEC’s actions have led to “material damage” for the firm. In a joint filing, Binance.US claimed that the SEC’s allegations have caused them significant harm.
The SEC initially alleged that Binance and Binance.US had committed securities violations in June 2023. The regulatory body wants to determine if entities outside the US, including Binance Holdings Limited, control certain Binance.US crypto wallets. The SEC is particularly concerned about the lack of autonomy in Binance.US’s control over customer assets, especially regarding potential access by Binance Holdings employees to these funds. The use of Amazon Web Services servers by Binance.US has also raised questions about the firm’s exclusive control over private keys and customer assets.
The SEC has requested the court to engage in additional discovery, including a targeted deposition. This would require Binance.US to select a representative to provide testimony. The agency is also open to other, more limited discovery methods. On the other hand, Binance.US has requested the court to end the expedited discovery process, arguing that they have complied with all demands.
Impact on Binance.US
Binance.US, in response to the SEC’s actions, has stated that they have suffered significant losses. COO Christopher Blodgett revealed that the company has had to cut more than 200 staff members since June 2023, representing two-thirds of the company. Users withdrew $1 billion in assets from the exchange, leading to a significant decline in revenues. The company cited the loss of banking partners and active users as reasons for the decline in revenue, along with rising operational and legal costs.
The ongoing legal battle between Binance.US and the SEC has significant implications for the future of the exchange. The SEC’s allegations, Binance.US’s defense, and the resulting impact on the company paint a complex picture of the regulatory challenges faced by the cryptocurrency industry. It remains to be seen how this legal saga will unfold and what consequences it will have for both parties involved.
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