Binance.US Faces SEC Scrutiny Over Compliance
The U.S. Securities and Exchange Commission (SEC) has expressed concerns about Binance.US’s compliance with regulatory requests for information regarding the management and safety of its customers’ assets. The SEC has filed a lawsuit against Binance Holdings Ltd. and its U.S. counterpart, BAM Trading Services (operating as Binance.US), for potential violations of U.S. securities laws. The lawsuit raises questions about the control that Binance employees outside the U.S. may have over American customers’ funds, suggesting a breach of regulatory requirements.
SEC Alleges Non-Compliance in Information Sharing
Following the lawsuit, Judge Amy Berman Jackson signed a consent order mandating Binance.US to demonstrate control over its customers’ assets and initiated expedited discovery to ensure compliance. However, the SEC has reported difficulties in obtaining complete disclosure from Binance.US, indicating a reluctance or inability on the part of Binance.US employees to provide all requested materials or address inquiries satisfactorily regarding asset management and control mechanisms.
The SEC’s filing reveals skepticism about the autonomy claimed by Binance.US over customer assets, particularly concerning the access that Binance Holdings employees might still have to these funds through the control of Amazon Web Services servers, which host the wallet software for Binance.US. The SEC’s investigation has uncovered potential gaps in the claimed exclusive control by Binance.US over its private keys and customer assets.
Binance.US Responds Amid Ongoing Legal Battle
In response to the SEC’s allegations, Binance.US has defended its compliance efforts, highlighting its cooperation with document requests and provision of evidence supporting its control over customer assets. The exchange argues that the SEC’s demand for information exceeds the boundaries of the consent order. Additionally, Binance.US denies claims of inadequate monitoring of asset transfers and mismanagement of customer funds.
The dispute also involves Binance Holdings founder Changpeng “CZ” Zhao, who, despite stepping down as CEO and not holding a director position at Binance.US, is a subject of the SEC’s requests for deposition. As the legal proceedings continue, the focus remains on the safety and transparency of customer asset management by Binance.US, highlighting the ongoing regulatory challenges faced by the cryptocurrency industry.
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