Recently, Binance.US has been grappling with significant hurdles, such as mandated staff layoffs and a notable decrease in revenue, all triggered by legal proceedings initiated by the U.S. Securities and Exchange Commission (SEC). Chief Operating Officer Christopher Blodgett unveiled in court documents that the company had to let go of more than 200 employees, which amount to two-thirds of its workforce, starting from June. This downsizing was a direct consequence of the SEC’s lawsuit against Binance, alleging various forms of misconduct, including mishandling customer funds and offering registered securities. The impact of the SEC’s actions has been severe, leading to a 75% decline in the trading platform’s revenues after the regulatory body sought a restraining order in June to freeze assets linked to Binance.
The lawsuit filed by the SEC against Binance in June included 13 charges, accusing the exchange and its founder, Changpeng Zhao, of participating in an “extensive web of deception.” The legal scrutiny was not limited to the global entity, as its U.S. subsidiary, BAM Trading, also faced allegations of collusion in wash trading to inflate trading volumes artificially. Despite reaching a $4.3 billion settlement with various federal agencies, Binance is still embroiled in the SEC lawsuit, which remains ongoing. Efforts to dismiss the suit were addressed in a motion presented before a federal judge in January.
The SEC’s move to freeze assets had detrimental effects on Binance.US’s ability to secure essential partnerships, such as banking services and market makers, dealing a significant blow to its operations. The legal actions resulted in a drastic reduction in the number of partners, dropping from over 20 to less than five in the months following the lawsuit. Described by Blodgett as a “near-mortal blow,” the platform faced challenges in maintaining its services and offerings amid the legal battle.
In response to the challenges faced, Binance.US sought alternative methods for users to convert dollars into cryptocurrencies, partnering with the crypto startup MoonPay after losing banking partners. The platform’s struggles occurred within a context of broader market instability, marked by decreased trading activity and prices following the collapse of high-profile entities like FTX in 2022. Additionally, previous layoff rounds saw 100 staff members being let go, alongside the departure of CEO Brian Shroder in September, further complicating the company’s situation.
As the legal saga unfolds, a sentencing hearing for Changpeng Zhao related to the DOJ settlement has been scheduled for April, indicating that the challenges faced by Binance.US are far from over. The impact of the SEC’s actions and ongoing legal battles will continue to shape the platform’s future and operations, with reverberations likely to be felt across the cryptocurrency industry as a whole.