Says Binance.US is ‘radioactive’ for banks, SEC delivers ‘near-death blow’
Binance.US suffered a “near-fatal injury” after a lawsuit by the United States Securities and Exchange Commission in June, forcing it to lay off more than 200 employees, saying it was “loaded” with revenue.
“For banks, we are radioactive,” Binance.US Chief Operating Officer Christopher Blodgett said on December 5 in an SEC lawsuit filed against the US arm of crypto exchange Binance.
“Who can blame them? Second, since they are known to be working with Binance.US, they can reasonably expect a nasty subpoena from the SEC,” he said.
In June last year, the SEC charged Binance, Binance.US and founder Changpeng “CZ” Zhao with selling unregistered securities, among other charges.
Blodgett said the exchange's customers were unable to trade in dollars after its banking partners backed out, and Blodgett said he was unable to get new ones — “effectively stifling the business.”
After the SEC action, Binance.US immediately had to “lay off more than 200 people” — more than two-thirds of the company — with “an estimated $1 billion in assets fleeing the platform” after a “planned increase” in revenue by 75 percent, Blodgett said.
Institutional trust has also eroded. The exchange had fewer than five market makers, compared to more than 20 market makers before the lawsuit, Blodgett said.
“At the highest level, he received a near-fatal beating.”
The SEC charged Binance, Binance.US and Zhao with selling unregistered securities, engaging in laundering to increase the amount of funds and the exchange's user fund included in the Zhao-tied Merit Peak account.
Related: SEC claims Binance.US refuses to provide information, asks court to intervene
The day after the lawsuit, the SEC filed a temporary restraining order (TRO) to freeze Binance.US assets over concerns that it could transfer customer funds offshore, which the judge denied.
Binance and Zhao agreed to a $4.3 billion settlement with the Justice Department, Treasury and Commodity Futures Trading Commission in November after admitting to money laundering and violating terrorism financing laws.
The SEC, however, is sticking to its charges against Binance, its US arm and Zhao, and is still digging for evidence against the exchange.
Zhao pleaded guilty to money laundering charges on April 3. He faces up to 18 months in prison.
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Update (March 7, 10:00 PM UTC): This article has been updated to indicate that Binance.US was not part of the US settlement.
