Key Insights
- The U.S. SEC has accused Binance.US of failing to cooperate in an ongoing probe.
- The regulator is particularly concerned about Binance.US’s use of Ceffu, a custody service provided by Binance’s international arm.
- In response to regulatory pressures, Binance.US has announced a significant downsizing of its workforce.
Binance.US, the American arm of the global cryptocurrency exchange, has found itself in the crosshairs of the U.S. Securities and Exchange Commission (SEC).
The SEC, in court documents made public last Thursday, accused the exchange of non-cooperation in an ongoing investigation.
The regulatory body alleges that Binance.US’s staking, clearing, and brokerage services are in violation of federal securities laws.
SEC’s main concern centers around Binance.US’s use of Ceffu
At the heart of the matter is the SEC’s concern about Binance.US’s use of Ceffu, a custody service provided by Binance’s international division. The SEC contends that this usage contravenes a prior agreement aimed at preventing the offshore storage of assets.
In essence, federal regulators are worried that Binance.US’s adoption of Ceffu might open the door for entities within Changpeng “CZ” Zhao’s global empire to gain control over U.S. customer assets.
The SEC’s frustration with Binance.US is palpable in the documents. According to the SEC, Binance.US’s holding company, known as BAM, has been less than forthcoming during the evidence-gathering process, known as discovery.
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They assert that BAM has provided a mere 220 documents, many of which consist of unintelligible screenshots and documents devoid of dates or signatures.
The SEC’s document, partially unsealed in August, raises questions about whether Binance.US is breaching a consent order that was intended to ensure that only local U.S. staff could access customer funds.
Binance.US countered SEC’s claims
Binance.US, for its part, appears to be pushing back against the SEC’s claims. In a previous filing on September 12th, the exchange dismissed the regulator’s concerns about Ceffu as “much ado about nothing.”
They characterized the SEC’s demand for additional documents as a “futile fishing expedition.” Binance.US contends that merely creating wallets as a provider of the Ceffu software does not translate into the international arm having custody or access to customer funds.
This clash with the SEC is just one of several regulatory challenges facing Binance.US. The exchange has also come under the scrutiny of the Commodity Futures Trading Commission (CFTC).
In response to these regulatory pressures, Binance.US announced a significant downsizing of its workforce, including the departure of its CEO, Brian Shroder. Key personnel, including the head of legal and the chief risk officer, are also reported to be leaving the company.