TLDR
- Binance.US CEO Norman Reed claims SEC labeled them “a cauldron of fraud” without evidence, leading to massive customer and banking losses after June 2023 lawsuit
- The company lost thousands of customers, billions in assets, and laid off 70% of staff following SEC actions
- While Binance Global settled for $4.3B with US authorities, Binance.US remains in litigation with SEC as a separate entity
- Reed expects USD fiat services to resume within weeks as the company stages a comeback
- Multiple US agencies investigated Binance.US but only SEC pursued action, which Reed characterizes as part of “Operation Chokepoint 2.0”
The ongoing saga between Binance.US and the Securities and Exchange Commission (SEC) has taken a new turn, as revealed by interim CEO Norman Reed in a recent interview. Reed openly addressed the aftermath of the SEC’s June 2023 lawsuit, which he claims severely impacted the cryptocurrency exchange’s operations.
The troubles began when the SEC filed charges against Binance, Binance.US, and founder Changpeng Zhao for alleged securities law violations. This action came in the wake of the FTX exchange collapse, which had heightened regulatory scrutiny across the cryptocurrency sector.
Within two weeks of the SEC’s lawsuit, Binance.US experienced what Reed describes as a bank run. The company lost thousands of customers and saw billions of dollars withdrawn from the platform. The impact was so severe that the exchange later had to reduce its workforce by 70%.
While Binance Global, the international arm of the company, reached a $4.3 billion settlement with U.S. authorities, Binance.US operates as a separate legal entity and wasn’t part of this agreement. The U.S. entity continues to battle the SEC in court.
Reed, a former SEC regulatory officer himself, pointed out that several other federal agencies conducted thorough examinations of Binance.US. These included the Department of Justice, the U.S. Attorney’s Office for the Southern District, the Commodity Futures Trading Commission (CFTC), the Office of Foreign Assets Control (OFAC), and the Financial Crimes Enforcement Network (FinCEN). According to Reed, none of these agencies pursued action against the company.
The SEC’s actions extended beyond the lawsuit. Reed revealed that the regulator attempted to freeze all of Binance.US’s assets through a temporary restraining order. The SEC claimed the company was defrauding clients and mishandling customer accounts. However, Reed states that in court, SEC lawyers admitted they hadn’t found evidence to support these allegations.
The impact on Binance.US’s banking relationships was particularly harsh. Reed described approaching hundreds of banks and financial institutions, all of which declined to work with the exchange due to reputational concerns stemming from the SEC’s characterization of the company.
Currently, Binance.US operates only as a crypto-to-crypto exchange, having lost its ability to process U.S. dollar transactions. However, Reed announced that the company expects to restore USD fiat services within the next few weeks.
The situation has been labeled by Reed as an example of “Operation Chokepoint 2.0,” referring to the alleged systematic debanking of cryptocurrency businesses. He described how the SEC contacted the exchange’s partners and issued subpoenas, which led payment processors to withdraw their services due to pressure from correspondent banks.
Reed also addressed the ownership structure of Binance.US, confirming that Changpeng Zhao remains the beneficial owner of both Binance.US and Binance.com. However, he noted that it had been months since his last communication with Zhao.
Despite the challenges, Reed expressed optimism about the company’s future. He mentioned that the change in SEC leadership and a new U.S. administration might lead to different regulatory approaches.
The company is now actively working to rebuild its operations. Reed indicated they are pursuing new banking partnerships and have reopened dialogues with state regulators.
Recent developments suggest a potential turning point for the exchange. The planned restoration of USD fiat services marks a crucial step in the company’s recovery efforts.
The ongoing litigation between Binance.US and the SEC remains unresolved, but Reed maintains that the company has emerged stronger from these challenges.