In a Court Filing, the U.S. Securities and Exchange Commission (SEC) pointed to Binance’s document production, regulatory violations, concerns about asset control, inconsistent statements, uncooperative responses, and limited cooperation in providing witness testimonies.
The securities regulator alleged that Binance.US’s holding company, BAM, failed to provide sufficient documents upon the agency’s discovery requests related to customer assets.
According to the document, BAM submitted only 220 documents during the discovery process. However, these documents included “unintelligible screenshots” and items lacking “dates or signatures.”
More Problems for Binance
The SEC also accused Binance.US of uncooperative responses to the SEC’s demands for relevant communications and refusing to produce documents it claimed did not exist, even though the SEC obtained these documents from other sources.
The SEC added that BAM’s document production failed to meet the timing despite the regulator’s efforts to extend the timeline.
Concerns about customer assets are also major highlights in the court filing. Regarding this matter, the regulator questioned customer assets coming under the control of Ceffu, a wallet custody software service owned by Binance Holdings Ltd.
The assets were originally supposed to be solely in BAM’s custody and control in the United States. However, the SEC argued that Ceffu appeared to have control of customer assets through its role in establishing wallets and keys related to BAM Customer Crypto Assets and hosting the wallet custody software on Amazon Web Services.
Furthermore, BAM was accused of providing inconsistent statements regarding Ceffu’s involvement in asset custody. Initially, BAM claimed that Ceffu’s activities were “unrelated to the current custody and control of Customer Assets,” but later acknowledged that Ceffu played a role in creating new crypto asset cold wallets and keys.
Lastly, BAM consented to only four testimonies from witnesses it considered suitable, according to the SEC’s filing. This limited cooperation raised further concerns about transparency and compliance.
On June 5, the SEC filed a lawsuit against Binance and its CEO Changpeng Zhao, claiming that the exchange violated U.S. securities laws. Additionally, the agency leveled 13 charges against the platform, including its failure to restrict U.S. investors from accessing Binance.com, and its operation as an unregistered exchange.
Under the increased regulatory pressure in the US, Binance has denied the SEC’s allegations and has vowed to fight the charges in court. However, the legal battle has challenged the company’s operations. In recent months, several key personnel have departed from Binance, including the company’s CFO, COO, and chief risk officer.
As reported by Wall Street Journal, Krishna Juvvadi, Chief Legal Officer and Sidney Majalya, Chief Risk Officer of BinanceUS, announced their departure from the company. The news came one day after CEO Brian Shroder resigned. BinanceUS’ spokesperson said that the business was being affected by the SEC.
Not only has BinanceUS seen changes in leadership and staff, other branches have also experienced the same. The list of executive departures include Gleb Kostarev, head of Binance for Eastern Europe and Russia, Vladimir Smerkis, general manager of Binance for Russia and CIS, Mayur Kamat, global head of product and design at Binance, and Leon Foong, Head of Asia-Pacific (APAC) at Binance .
Some observers believe that the executive departures are a sign that Binance is struggling to cope with the SEC’s investigation. Others believe that the departures are simply part of a normal turnover cycle at a rapidly growing company. Binance is hiring as well, which adds to this view.
The exchange has conducted significant staff cuts, terminating around 100 employee contracts, approximately one-third of its workforce. In July, there were reports of a global reduction in staff size, impacting up to 1,000 employees, or about one-third of the workforce, though some sources suggested the number could be higher.
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Author: Nicholas Say