Binance.US Faces SEC Scrutiny Over Transparency Issues
Binance.US, the American affiliate of the global cryptocurrency exchange Binance, is under investigation by the U.S. Securities and Exchange Commission (SEC) for allegedly failing to prove its control over customer assets.
The SEC’s inquiry is part of a broader legal battle between the regulator and Binance entities, including the parent company and its founder, Changpeng Zhao. The SEC has accused Binance, Zhao and the exchange’s U.S. arm of artificially inflating its trading volumes, diverting customer funds, failing to restrict U.S. customers from its platform and misleading investors about its market surveillance controls.
The SEC claims that Binance.US has been “unable or unwilling” to cooperate with its requests for information regarding the custody of customer assets, despite a court order. The SEC seeks further discovery to address these issues, including a targeted deposition.
In response to the SEC’s allegations, Binance.US has defended its compliance efforts, emphasizing its cooperation with document requests and the provision of evidence supporting its control over customer assets. The exchange contests the SEC’s continued demand for information as exceeding the boundaries of the consent order.
This regulatory clash comes at a time when the crypto market is booming, 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, Binance.US has suffered significant financial losses and staff reductions since the SEC’s actions. The exchange’s COO Christopher Blodgett testified that revenues plunged by over 75% and assets withdrawals exceeded US$1 billion since June 2023. The exchange also laid off over 200 employees in the same period.
The SEC’s lawsuit against Binance is one of the most high-profile cases in the crypto industry, as it involves the world’s largest crypto exchange by trading volume and its charismatic founder. The outcome of the case could have far-reaching implications for the future of crypto regulation and innovation.