Binance.US Faces SEC Scrutiny Over Customer Assets
Highlights
- The SEC has expressed concerns about Binance.US's compliance with requests for information on customer asset management.
- A consent order was issued requiring Binance.US to prove it controls its customers' assets, but the SEC claims full disclosure has not been provided.
- The SEC questions Binance.US's claimed autonomy over customer funds, particularly regarding potential access by Binance Holdings employees.
The U.S. Securities and Exchange Commission (SEC) has raised concerns over Binance.US‘s compliance with regulatory requests for information regarding the management and safety of its customers’ assets. This scrutiny comes amid allegations against Binance Holdings Ltd. and its U.S. counterpart, BAM Trading Services (operating as Binance.US), for potential violations of U.S. securities laws. The SEC’s lawsuit, filed last year, specifically questions the control Binance employees outside the U.S. may have over American customers’ funds, suggesting a breach of regulatory requirements.
SEC Alleges Non-Compliance in Information Sharing
Following the lawsuit, a consent order was signed by Judge Amy Berman Jackson, mandating Binance.US to demonstrate control over its customers’ assets. This order also initiated a phase of expedited discovery to ascertain compliance. However, the SEC has reported difficulties in obtaining complete disclosure from Binance.US, indicating a reluctance or inability on the part of Binance.US employees to furnish all requested materials or satisfactorily address inquiries regarding asset management and control mechanisms.
Despite assertions from Binance of adherence to the consent order’s stipulations, the SEC’s filing reveals skepticism about the autonomy Binance.US claims to have over customer assets. Particularly contentious is the access Binance Holdings employees might still have to these funds, especially through the control of Amazon Web Services servers, which host the wallet software for Binance.US. The SEC’s investigation has unveiled potential gaps in the claimed exclusive control by Binance.US over its private keys and, consequently, customer assets.
Binance.US Responds Amid Ongoing Legal Battle
In response to the SEC’s allegations, Binance.US has defended its compliance efforts, emphasizing its cooperation with document requests and the provision of evidence supporting its control over customer assets. The exchange contests the SEC’s continued demand for information as exceeding the boundaries of the consent order. Additionally, Binance.US refutes claims of inadequate monitoring of asset transfers and mismanagement of customer funds.
The dispute extends to Binance Holdings founder Changpeng “CZ” Zhao, who, despite stepping down as CEO and not holding a director position at Binance.US, is also a subject of the SEC’s requests for deposition. As the legal proceedings continue, the focus remains on the safety and transparency of customer asset management by Binance.US, highlighting the ongoing regulatory challenges facing the cryptocurrency industry.
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