The SEC has asked the court for further action after reaching a ‘dead end’ with Binance.US.
The SEC filed a joint motion on March 5 asking the court to take further action against Binance.US for allegedly failing to comply with regulatory requests for customer asset information.
According to the filing, the SEC alleged that Binance.US’s investigation was insufficient, that the company’s counsel refused to answer key questions, and that the company changed aspects of its operations without providing updates.
Meanwhile, Binance.US claimed in a joint filing that it fully complied with all of the regulator’s requests for information and that the SEC’s actions caused “material harm” to the company.
The SEC first alleged that Binance and Binance.US committed securities violations in June 2023. Soon after, the SEC obtained a temporary restraining order against Binance.US, requiring the exchange to provide data and comply with its orders.
SEC Concerns
The SEC is primarily concerned about whether certain Binance.US cryptocurrency wallets are controlled by non-US entities, including Binance Holdings Limited.
The regulator’s concerns relate to Binance.US’s possible lack of complete autonomy in controlling customer assets, particularly the potential for Binance Holdings employees to access these funds through Amazon Web Services servers.
These servers power Binance.US’ wallet software, raising questions about the company’s exclusive control over private keys and customer assets.
The SEC also raised concerns about whether Binance.US employees exist outside the United States and receive compensation from the global Binance entity. The watchdog also seeks to ensure that Binance.US appropriately monitors and blocks prohibited transfers to international entities linked to Binance.
The SEC asked the court to engage in additional discovery, including targeted depositions that would require Binance.US to select a representative to provide binding testimony. The agency also said it is open to other, more limited, discovery methods.
material damage
According to the filing, Binance.US simultaneously asked the court to terminate the expedited investigation process on the grounds that it had fully complied with the court’s requirements.
The company also claimed that the SEC’s actions caused it significant harm through the loss of banking partners and active users. The company added that these issues led to its decision to reduce staff.
According to testimony from Binance.US COO Christopher Blodgett, the company has laid off more than 200 employees (two-thirds of the company) since June 2023 as users withdraw $1 billion in assets from the exchange. It was revealed.
Blodgett wrote that following the SEC’s action, Binance.US revenues “exploded,” falling more than 75% due to increased operating and legal costs.