Binance.US, a prominent cryptocurrency exchange, has been grappling with significant challenges in the wake of legal actions taken by the U.S. Securities and Exchange Commission (SEC). These challenges include forced layoffs and a steep decline in revenue, as revealed by the company’s Chief Operating Officer Christopher Blodgett in court documents. Since June, Binance.US has had to terminate over 200 employees, amounting to two-thirds of its workforce, directly attributed to the SEC’s lawsuit against the exchange.
The SEC’s lawsuit against Binance alleged various forms of misconduct, including mishandling customer funds and offering registered securities. The legal action had a severe impact on Binance.US, with the trading platform witnessing a staggering 75% drop in revenues after the SEC sought a restraining order in June to freeze assets associated with Binance. The lawsuit included 13 charges against Binance and its founder, Changpeng Zhao, accusing them of engaging in an “extensive web of deception.”
The legal scrutiny extended beyond the global entity to its U.S. subsidiary, BAM Trading, with allegations of collusion in wash trading to artificially inflate trading volumes. While Binance reached a settlement with various federal agencies, the SEC lawsuit remains ongoing. The platform’s attempts to have the lawsuit dismissed were addressed in a motion argued before a federal judge in January.
The SEC’s move to freeze assets further compounded Binance.US’s challenges, hindering its ability to secure crucial partnerships, such as banking services and market makers. Blodgett described the lawsuit and restraining order as a “near-mortal blow” to the platform’s operations, leading to a drastic reduction in the number of partners from over 20 to less than five in the months following the legal action. In response, Binance.US sought alternative means for users to convert dollars into cryptocurrencies, partnering with the crypto startup MoonPay after losing banking partners.
The downturn experienced by Binance.US coincided with broader market instability, resulting in decreased trading activity and prices following high-profile collapses, such as FTX in 2022. Moreover, Binance.US had previously conducted layoffs, with 100 staff members let go in September, alongside the departure of CEO Brian Shroder. The legal saga continues for Binance.US, with a sentencing hearing for Changpeng Zhao related to the DOJ settlement scheduled for April.
Binance.US continues to face numerous challenges stemming from the legal actions initiated by the SEC. The forced layoffs, revenue decline, and disrupted partnerships have significantly impacted the platform’s operations. As the legal battle persists, Binance.US must navigate these obstacles to regain stability and rebuild its reputation in the cryptocurrency industry.