- Binance and the SEC have been entangled in a legal battle for the past year.
- The regulatory pressure has impacted the exchange’s operations.
- The SEC has accused Binance of non-cooperation in the ongoing proceedings.
Binance, the world’s largest cryptocurrency exchange, has weathered intense regulatory storm over the past year, battling sanctions from global regulatory authorities including the United States Department of Justice (DoJ), the Commodity Futures Trading Commission (CFTC), and the Securities and Exchange Commission (SEC).
Last November, the exchange resolved most of its battles with the former two, resulting in a staggering $4.3 billion settlement and the ousting of former CEO CZ. However, the SEC, relentless in its pursuit, has not let up on the exchange, seeking accountability for its allegations of the exchange’s violation of securities laws.
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Despite Binance’s resilience amidst these challenges, the prolonged regulatory battle has taken its toll on the exchange.
Binance SEC Lawsuit Impact
According to a March 5 report, Binance.US COO Christopher Blodgett disclosed the severe consequences of the ongoing Binance SEC lawsuit, including the layoff of over 200 employees.
Highlighting the immediate impact of the lawsuit, filed in June 2023, Blodgett revealed that the “near mortal blow” resulted in a staggering $1 billion outflow from the exchange, which triggered an approximate 75% decline in revenue and a broader downturn in business activities.
The exchange also witnessed reduced business relationships with several financial partners, including banks and market makers; many demanded increases in collateral before terminating their relationships. This resulted in deficient measures of withdrawals and deposits for the exchnage’s users, a problem still partially unsolved due to its impaired ability to form new ones.
Despite the severity of the impact, the exhange’s woes with the financial watchdog does not appear to be tanking soon.
Binance SEC Lawsuit Intensifies
In a recently filed joint status report, the SEC and Binance have argued head-on, accusing the other of non-cooperation in the ongoing lawsuit.
Seeking court intervention in its battle with the exchange, the SEC alleged Binance’s “unwillingness to answer” key questions and meet its requests in the discovery process, arguing the hinderance of the case’s progress.
Binance countered the commission, emphasizing that the commission’s requests are outside the scope of the Consent Order, which demonstrates its “whack-a-mole approach to this purportedly expedited discovery process.”
“The SEC failed to meaningfully engage and instead persistently attempted to broaden the scope of the inspection well beyond any reasonable standard for expedited discovery,” stated Binance.
Binance further contended that the commission’s request to depose former CEO Changpeng Zhao is an “improper desire to conduct merits discovery under the pretext of the consent order,” for which the commission has failed to provide a credible basis.
On the Flipside
- A ruling on Binance’s motion to dismiss the SEC’s lawsuit is expected in June 2024.
- Binance founder, Changpeng Zhao, is currently awaiting sentencing in the United States.
- The SEC, which has also launched legal proceedings against Coinbase, Kraken, and Ripple, has been accused of adopting a “regulation by enforcement” approach to the industry.
Why This Matters
The loss of business and mandated workforce downsizing in the wake of the SEC’s lawsuit underscore the impact of the mounting regulatory pressure on Binance, and the SEC’s relentless efforts threaten to exacerbate the situation further.
Binance is also facing regulatory troubles in Nigeria and has made its partial exit from the country amid mounting pressure:
Binance Ceases Nigerian Naira Support Post-P2P Saga
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