Home Community Insights Binance Laid Off 2/3 of Staff in The US, Amid Securities and Exchange Commission (SEC) Lawsuit

Binance Laid Off 2/3 of Staff in The US, Amid Securities and Exchange Commission (SEC) Lawsuit

Binance Laid Off 2/3 of Staff in The US, Amid Securities and Exchange Commission (SEC) Lawsuit

Leading crypto exchange Binance has revealed that it laid off two-thirds of its workforce in the U.S., due to the Securities and Exchange Commission (SEC) lawsuit that negatively impacted its revenue.

Binance US COO Christopher Blodgett revealed that trading volumes on the exchange have so far imploded since June as a result of the SEC’s action. This saw the sum of $1 billion asset exodus from the exchange, which forced the company to lay off more than 200 employees. The reduction in headcount has impacted the exchange’s ability to respond to discovery requests from the SEC because teams are stretched thin.

Blodgett added that the Binance revenue fell around 75% after the SEC sought a restraining order in June to freeze assets. Also, he disclosed that the exchange legal costs surged to $10 million, and its auditor expenses have skyrocketed by 10X in addition to the loss of banking relationships, which allowed customers to withdraw their digital assets into fiat.

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Since then, the exchange has struggled to find new banking partners to work it. “To banks, we are radioactive. Who can blame them? The second it becomes known that they are working with Binance US, they can reasonably expect a nasty subpoena from the SEC”, he added.

In the June lawsuit, the SEC filed 13 charges against Binance, accusing the exchange of mishandling customer funds and offering registered securities, alleging that the company and founder Changpeng Zhao had engaged in an “extensive web of deception.”

The lawsuit targeted not only the global company but also its U.S. arm, which operates under an entity called BAM Trading. In separate legal complaints, both the SEC and the Justice Department claimed Binance.US which Binance had complained was independent had engaged in so-called wash trading in collusion with its parent company to artificially inflate volume on the platform.

In November, Binance settled charges with the Justice Department, the Treasury Department, and the Commodity Futures Trading Commission, agreeing to a $4.3 billion settlement, although the SEC was absent from the agreement. Binance further agreed to a complete exit from the U.S., as part of the settlement.

The SEC lawsuit which involves broader allegations of fraud is still ongoing, with Binance seeking to dismiss the suit in a motion that was argued before a D.C. federal judge in January.

As part of the SEC’s enforcement action, it took the extraordinary step of seeking to freeze the U.S. trading platform’s assets, arguing that Zhao could remove the funds from the exchange. A judge rebuffed the request in June, although it still significantly hurt Binance.US’s business, according to Binance COO Blodgett.

A recent development by the SEC reveals that the Binance U.S. arm has not been providing answers to key questions relating to customer assets and other core elements of an ongoing investigation.

In response to these allegations, Binance stated that the SEC’s claims concerning customer assets were unfounded, adding that it had gone above and beyond its obligations to the securities watchdog.

The exchange further added that it had produced thousands of documents concerning every conceivable aspect of its asset custody practices, including declarations under oath, and monthly reports, and facilitated several inspections of shared custody devices involving customer assets.

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