Regulatory scrutiny has intensified as the long-running dispute between the U.S. Securities and Exchange Commission (SEC) and Binance.US unfolds. Concerns raised by the SEC regarding compliance with information requests from cryptocurrency exchanges have cast a dark shadow over Binance Holdings and US-based BAM Trading Services, which operates under the name Binance.US.
Obstacles to Disclosure Prompts SEC Action
The SEC lawsuit, which began last year, took a nuanced turn by examining the influence wielded by Binance employees located outside the United States over funds belonging to U.S. customers. The consent order approved by Judge Amy Berman Jackson allows Binance.US to clearly demonstrate control over customers’ assets and accelerate the discovery phase to ensure compliance.
However, the SEC has faced obstacles in obtaining comprehensive disclosures from exchanges, suggesting possible reluctance or inability on the part of exchange staff to fulfill requests for information regarding asset management and control mechanisms.
Binance.US’ strong defense amid skepticism and regulatory disputes
In response to the SEC’s claims, Binance.US strongly defended its compliance efforts, emphasizing its cooperation with document requests and providing evidence to substantiate its claims of control over customer assets.
Despite the exchange’s firm claims, the SEC remains skeptical about the company’s professed autonomy, particularly the possibility of access for Binance Holdings employees through the Amazon Web Services servers that host Binance.US’ wallet software.
The ongoing regulatory feud has exposed potential cracks in the exclusive control Binance.US claims over private keys and customer assets.
As of today, the market cap of cryptocurrencies stood at $2.4 trillion. Chart: TradingView.com
Impact on Binance.US operations and personnel
Meanwhile, the SEC’s efforts last year to halt Binance.US operations via a temporary restraining order (TRO) left a lasting mark on the cryptocurrency exchange.
In testimony released by Binance.US executive Christopher Blodgett, the immediate aftermath of the TRO witnessed significant asset outflows of approximately $1 billion. This mass exodus resulted in a 75% loss in revenue and forced the company to implement significant layoffs and reduce its workforce by two-thirds.
The financial damage to Binance.US has been notable, with legal costs soaring to $10 million and audit costs soaring “ten-fold.” The situation was made worse by the breakdown in banking relationships, which left customers unable to withdraw their digital assets for fiat.
These financial burdens have hampered the exchange’s ability to respond to SEC discovery requests as teams grapple with resource shortages resulting from significant reductions in headcount.
Featured image by Forkast News, chart by TradingView