The Securities and Exchange Commission’s (SEC) attempt last year to put Binance.US on ice with a Temporary Restraining Order (TRO) has led to a mass exodus of employees as revenues plummeted and market trust issues arose.
Following the SEC’s moves against Binance.US, the exchange witnessed a $1 billion asset outflow, a 75% revenue nosedive, and 200 layoffs. The platform is struggling with expenses related to legal proceedings, auditor fees, and the loss of banking relationships, all of which are adversely affecting its ability to function smoothly.
Binance.US Losses Amid Legal Debacle
“Right after the TRO, we saw about $1 billion worth of assets flee the platform, both crypto and fiat,” quipped Christopher Blodgett, head at Binance.US, during his December 2023 testimony, which recently emerged as part of the SEC-Binance lawsuit update.
This $1 billion asset loss led to a 75% revenue drop and the sad sight of 200 employees hitting the road (that’s two-thirds of the workforce) at Binance’s US outpost. The layoffs have left the exchange’s ability to respond to SEC disclosure demands, as teams are extremely limited.
Blodgett also revealed that the exchange’s legal expenses rocketed to $10 million, while auditor costs increased “10-fold,” on top of losing banking relationships, allowing clients to pull their digital assets into fiat.
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Right after the TRO hit, our banks demanded a hefty collateral boost. But eventually, they just ghosted us. As a result, our clients were left high and dry, unable to deposit or withdraw fiat on the platform, essentially suffocating our business.
Since then, the exchange has been unable to swipe right on any new banking partners, according to Blodgett.
In addition, Zhao’s legal entanglements are casting a cloud over Binance’s operations, potentially swaying the outcome of the SEC’s lawsuit against the company. Amid these legal disputes, the looming sentencing of Binance CEO Changpeng Zhao on money laundering charges adds another twist to the legal saga. Zhao’s fate will be decided on April 3rd, with the possibility of an 18-month all-expenses-paid vacation in the slammer.
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SEC Demands Disclosure of More Paperwork from Binance.US
The SEC seeking answers about the love-hate relationship between Binance and its American sidekick, Binance.US, managed by BAM Trading. It’s asking for extra info on who was pulling the strings and had their mitts on clients’ assets and private keys.
The Securities and Exchange Commission (SEC) has expressed its concern, stating that, in its opinion, it’s like:
At an impasse with BAM over some key questions, where BAM couldn’t or wouldn’t answer.
This standoff requires some judicial oversight to untangle the mess of managing clients’ assets and keeping up with regulatory directives.
On the flip side, BAM is standing its ground, staunchly defending its approach, claiming that it:
Stepped beyond its duties to provide ‘limited’ expedited disclosure as per the Consent Order, responding to SEC’s exceptionally broad queries and unfounded worries about asset storage.
BAM’s statement also mirrors the broader disagreement within the crypto industry regarding the delicate balance between regulatory compliance and operational autonomy.
The dispute between the SEC and BAM once again highlights a pivotal moment for regulatory oversight in the crypto sphere. It underscores the ongoing struggle to define the boundaries of compliance for digital asset exchanges operating in the US.
While the court debates the SEC’s request to intervene, the outcome of this legal fight could ultimately set significant precedents for governance and operational standards across crypto exchanges.
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