TLDR
- Binance.US suffered massive operational impact following SEC’s 2023 lawsuit, including loss of banking relationships
- Company lost majority of workforce and billions in customer assets after SEC actions
- Despite multiple agency investigations, only SEC pursued legal action against Binance.US
- Platform expects to restore USD fiat services in coming weeks
- CEO Norman Reed characterizes SEC actions as part of broader crypto industry debanking trend
The story of Binance.US’s regulatory challenges has taken an unexpected turn, with interim CEO Norman Reed revealing new details about the company’s struggles and planned recovery. In a candid interview, Reed outlined how the cryptocurrency exchange weathered what he describes as unprecedented regulatory pressure.
The exchange’s troubles intensified in June 2023 when the Securities and Exchange Commission filed charges against Binance, its U.S. arm, and founder Changpeng Zhao. The lawsuit came during a period of heightened scrutiny following the collapse of competitor FTX.
Reed revealed that the impact was immediate and devastating. “Within two weeks of that lawsuit, we’d lost thousands of customers, billions of dollars went out the door,” he said. The exodus of funds and customers eventually forced the company to reduce its staff by 70%.
The situation became more complex when Binance’s global entity reached a $4.3 billion settlement with U.S. authorities. However, Binance.US, operating as a separate legal entity, remained caught in ongoing litigation with the SEC.
One of the most striking aspects of the case, according to Reed, was the contrast in regulatory approaches. While multiple federal agencies – including the Department of Justice, CFTC, OFAC, and FinCEN – conducted thorough examinations of Binance.US, only the SEC pursued enforcement action.
The regulatory pressure extended beyond direct legal action. Reed described how the SEC attempted to secure a temporary restraining order that would have frozen all of Binance.US’s assets. The commission claimed the company was engaging in fraudulent activities, though Reed states that SEC lawyers later admitted in court they lacked evidence for these allegations.
The impact on the company’s banking relationships proved particularly challenging. Reed detailed unsuccessful attempts to maintain financial partnerships, approaching hundreds of banks and financial institutions. The SEC’s characterization of the company as “a cauldron of fraud” effectively closed doors throughout the financial sector.
These banking challenges forced Binance.US to operate solely as a crypto-to-crypto exchange, without the ability to process U.S. dollar transactions. However, Reed announced plans to restore USD fiat services within weeks, marking a potential turning point for the company.
The situation fits into what industry observers call “Operation Chokepoint 2.0,” referring to the systematic removal of banking services from cryptocurrency businesses. Reed explained how the SEC’s actions led payment processors to withdraw their services under pressure from correspondent banks.
Questions about ownership structure persist, with Reed confirming that Changpeng Zhao remains the beneficial owner of both Binance.US and Binance.com. However, he emphasized the operational separation between the entities.
The company’s path forward includes rebuilding crucial partnerships. Reed indicated that discussions with state regulators have resumed, and new banking relationships are being explored.
Looking ahead, Reed expressed cautious optimism about the exchange’s future. The anticipated change in SEC leadership and a new U.S. administration could signal a shift in the regulatory landscape.
Recent developments suggest positive momentum for Binance.US. The planned restoration of USD services represents a crucial step toward full operational recovery.
The exchange continues to operate under ongoing SEC litigation, but Reed maintains that the challenges have ultimately strengthened the company’s resolve and operational framework.
Reed noted that the experience might serve as a case study in regulatory resilience. “When we save this company and actually make it successful again, this will be some kind of case study,” he said.
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