Binance.US Chief: The SEC Called Us a Cauldron of Fraud, Without Any Evidence

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What to know:

  • After the SEC’s lawsuit, Binance.US lost thousands of customers, saw billions of dollars go out the door and was later forced to lay off 70% of staff.
  • The firm is now staging a comeback and expects to have USD fiat rails operational again within the next few weeks.

The Securities and Exchange Commission (SEC), headed by Gary Gensler, has been calling Binance.US a “hotbed of fraud.” Despite not providing any proof to support these allegations in court, the SEC has used its authority to cut off Binance.US’s banking connections and fiat currency on-ramps, according to the interim leader of Binance.US in an interview with CoinDesk.

In June 2023, due to the deception they perceived from crypto exchange FTX, the Securities and Exchange Commission (SEC) filed lawsuits against Binance, Binance.US, and their proprietor Changpeng Zhao. The allegations ranged from breaking securities laws. Later on, Binance reached a $4.3 billion settlement with U.S. officials, and Mr. Zhao served some prison time.

Binance.US, a distinct entity from Binance Global, did not participate in that settlement at any point. Currently, it’s embroiled in a legal standstill with the SEC, a situation that has persisted for the past 18 months due to the impact on its business following regulatory action, limiting its operations to crypto-to-crypto trades only.

Binance.US’s interim CEO, Norman Reed, stated, “We won’t recover from the harm the SEC inflicted on us.” Within two weeks of their lawsuit against us, we lost thousands of customers, saw billions of dollars exit our company, and were ultimately compelled to let go 70% of our workforce. Financial institutions and banks distanced themselves from us because the SEC portrayed us as another deceptive firm like FTX. It’s ironic that a U.S. financial regulator could inadvertently spark a bank run at our company, which is what they appear to have done.

It’s good news that Binance.US seems to be on the road to recovery. Reed stated that they anticipate reactivating USD fiat services within a few weeks; this could signal a strong resurgence for the company. They are also reportedly reaching out to banks and engaging in conversations with state regulators again, which suggests a comeback might be imminent.

As an analyst, I’d like to rephrase the given statement in a first-person perspective:

In my role as an analyst, I find it important to express that Binance.US has not sought or required sympathy throughout its journey. Despite facing restraining orders, reporting obligations, and losing banking partners, the platform has persevered with resilience. However, with a new U.S. administration and the conclusion of Chairman Gensler’s tenure marked by what I perceive as excessive vindictiveness at the SEC, I, as a former regulatory officer myself, feel compelled to voice my perspective on an issue that I consider unjust.

Various authorities such as the Department of Justice (DOJ), U.S. Attorney’s Office for the Southern District, Commodity Futures Trading Commission (CFTC), Office of Foreign Assets Control (OFAC), and Financial Crimes Enforcement Network (FinCEN) scrutinized our operations. When I say they ‘scrutinized,’ I mean they conducted extensive investigations on us. However, none of them took any action against us. The only exception was the Securities and Exchange Commission (SEC) who chose to focus on us.” – Reed explained.

Recently, the de-banking of cryptocurrency businesses (and certain executives) – often referred to as “Operation Chokepoint 2.0” – has been a topic of conversation. Notable figures such as Marc Andreessen from a16z and Brad Garlinghouse, CEO of Ripple, have brought it up in public discussions.

The discontinuation of services to Binance.US can be seen as a demonstration of chokepoint tactics, according to Reed. This action primarily consisted of the SEC pressuring the exchange’s associates and using subpoenas as a scare tactic. Once the lawsuit was filed, the potential reputational risk became too significant, causing payment processors to withdraw their services due to concerns from their corresponding banks.

During that timeframe, we reached out to numerous banks and financial organizations. However, none of them agreed to work with us, as they perceived us as a hotbed of fraud, as stated by the Securities and Exchange Commission (SEC).

Following the lawsuit against Binance.US, the Securities and Exchange Commission (SEC) moved to shut down the company by seeking a temporary restraining order, which would have prevented them from accessing their assets. The SEC alleged that Binance.US was deceiving clients, misusing client accounts, and transferring funds abroad, according to Reed’s statement.

However, in a court setting, the Securities and Exchange Commission (SEC) attorneys were compelled to admit they hadn’t discovered any proof of this allegation, according to Reed. Yet, this didn’t deter them from releasing statements about us. One would expect the SEC, being the regulatory enforcers, to wear the ‘white hats’, but it seems their actions don’t always align with that image.

As an analyst, I can confirm that there’s one shared aspect between Binance.US and Binance.com: Changpeng “CZ” Zhao maintains control as the primary shareholder of both entities. Recently, I reminisced about my conversation with CZ, which took place several months ago. During that time, he had approached me with the proposition for me to spearhead Binance.US’s operations.

In that moment, it seemed as though I was appointed captain of the Titanic following its collision with the iceberg, doomed to share its fate. Yet, we persevered, and as a result, our company has grown stronger than ever before. For more than a year now, I’ve been telling my team that if we manage to rescue this company and bring it back to success, this will serve as an inspiring example for future generations.

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2025-01-14 11:03