SEC Lawsuit’s Heavy Toll on Binance.US: Staff Termination and Slumped Revenues
Summary:
Binance.US has faced significant challenges following a June lawsuit from the United States Securities regulator, which resulted in the termination of over 200 staff and a sharp decrease in revenues. The lawsuit led to a loss of banking partners, a significant outflow of assets, and reduced institutional trust. Despite a multi-billion dollar settlement for violations relating to money laundering and terrorism financing, the SEC presses on with its charges, even as founder Changpeng “CZ” Zhao awaits sentencing for a money laundering charge.
After facing a lawsuit in June from the United States Securities regulator, Binance.US has had to let go over 200 staff members as its revenues took a major hit, an insider at the company explains. The crypto exchange's COO, Christopher Blodgett, during a December testimony, referred to the company as being "radioactive" to banks. He explained that as soon as the news of their business relationship with Binance.US hits, banks anticipate an unpleasant subpoena from the SEC.
The SEC had accused Binance, along with subsidiary Binance.US and founder Changpeng “CZ” Zhao, of selling unregistered securities and more in June last year. Post the banking partners withdrawing their support, the exchange was left without a means to conduct transactions in US dollars, thus constricting the business significantly.
The aftermath of the SEC's move witnessed around “$1 billion assets fleeing the exchange platform,” and was followed by complete termination of 200 plus employees as revenues plunged by over 75%, stated Blodgett. Also, the trust of institutional investors suffered a blow, with the number of market makers falling below five from over twenty before the lawsuit.
Additionally, the SEC made allegations against Binance, Binance.US, and Zhao regarding engaging in manipulated trades to enhance volumes and unethical mingling of user funds in an account linked to Zhao's Merit Peak. On the day following the lawsuit, the SEC moved for a temporary restraining order to stop Binance.US from moving customer funds abroad, which was later turned down by a judge.
While admitting to violations concerning money laundering and terrorism financing, Binance, Binance.US, and Zhao reached a settlement with the DOJ, Treasury, and the CFTC, paying $4.3 billion in November. Still, the SEC continues to press charges and is on a mission to unearth further evidence against the exchange.
Zhao, on his part, has already pleaded guilty to a charge of money laundering and his sentencing is scheduled for April 3, with a sentence of up to 18 months in prison awaiting him.
Published At
3/7/2024 8:59:32 AM
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