Tag: binance.us

Binance.US Said to Have Laid Off Employees After US SEC Charges

The US affiliate of crypto giant Binance has carried out a round of layoffs since regulators last week charged it with violating securities laws and sought to freeze its assets, said two people with knowledge of the dismissals and employees’ social media posts.

One of the sources said around 50 people were laid off. Reuters was unable to independently verify the number or seniority of employees affected.

A Binance.US spokesperson did not respond to emails and calls seeking comment.

Employees in Binance.US’ legal, compliance and risk departments were among those dismissed, the people told Reuters, requesting anonymity because the matter is private.

The SEC on June 5 accused Binance and its founder and CEO Changpeng Zhao of creating Binance.US as part of a “web of deception” to evade securities laws aimed at protecting US investors. Binance said it would defend itself “vigorously.”

The SEC also sued Binance.US’ operating company, BAM Trading, alleging that it misled investors about “non-existent trading” controls over its platform.

A day later, the SEC asked a federal court to freeze Binance.US’ assets, including more than $2.2 billion (nearly Rs. 18,000 crore) held in crypto and some $377 million (nearly Rs. 3,100 crore) in US dollar bank accounts. The SEC expressed concern that the exchange could move those funds offshore.

Binance.US called the request “unwarranted” and said the SEC’s allegations were “unjustified.”

Two Binance.US employees said on LinkedIn on Wednesday they were leaving the company, with one citing a “round of layoffs.”

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Binance.US Halts Dollar Deposits After SEC Crackdown, Asks Customers to Withdraw Dollar Funds

The US affiliate of Binance said it was halting dollar deposits and gave customers until Tuesday to withdraw their dollar funds, after the US securities regulator asked a court to freeze its assets.

Binance.US, the purportedly independent partner of Binance, said in a tweet on Thursday that its banking partners were preparing to stop dollar withdrawal channels as early as June 13.

The SEC sued Binance, its CEO and founder Changpeng Zhao, and Binance.US’s operator on Monday, in a dramatic escalation of a crackdown on the industry by US regulators. The SEC sued major US exchange Coinbase a day later.

Binance.US said in the tweeted customer notice that it would no longer accept dollar deposits as part of plans to change to a “crypto-only exchange”. It called the SEC’s civil charges “unjustified” and said it would “vigorously defend” itself.

The SEC alleged in 13 charges on Monday that Binance had in a “web of deception” artificially inflated trading volumes and diverted customer funds, as well as failing to restrict US customers from its platform.

The SEC on Tuesday asked a federal court to freeze Binance’s US assets. Binance.US called the motion “unwarranted”, saying it had addressed SEC concerns over the safety of customer assets.

The SEC said it had not received “sufficient reassurance” that Binance.US’s customer assets were controlled by its operator, BAM Trading, “rather than under the control or influence of Binance or Zhao, a person who has openly expressed his desire to avoid compliance with US law.”

Zhao and Binance had “free reign” to handle Binance.US assets, the SEC said. “They have exercised this control over US investor assets with no oversight or controls to ensure that those assets are properly secured,” it added.

Binance did not immediately reply to a request for comment. It has said it would “defend our platform vigorously,” saying the SEC was limited in reach as Binance was not a US exchange.

Binance.US’s customer assets total more than $2.2 billion. (nearly Rs. 18,100 crore) held in crypto and some $377 (nearly Rs. 3,100 crore) million in US dollar bank accounts, the SEC said.

‘Existential Threat’

BAM Trading holds customer’s funds directly with California-based Axos Bank, according to a letter from lawyers for BAM Trading to the SEC dated May 26, which was made public by the SEC on Tuesday.

Axos did not immediately respond to a request for comment sent via email.

Binance.US had struggled to find banking partners after the failure of Signature Bank, the Wall Street Journal reported in April.

In its tweet on Thursday, Binance.US said crypto-denominated trading, deposits, withdrawals and “staking” – where users deposit cryptocurrencies for use in blockchain transactions — would remain fully operational.

“This is very serious for Binance.US because Americans cannot use Binance Global,” said Clara Medalie, director of research at Kaiko.

“The inability for Binance.US to offer USD trading services in a region the exchange was specifically built to operate in is an existential threat.”

Crypto prices barely reacted to the news, with bitcoin last trading up 0.4 percent at $26,610 (nearly Rs. 22 lakh). It was headed for a weekly loss of about 1.9 percent, after having dipped to an over two-month low of $25,350 (nearly Rs. 21 lakh) earlier in the week as the SEC crackdown stoked nerves.

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Binance CEO’s Trading Firm Received $11 Billion via Client Deposit Company, Claims SEC

Merit Peak, an offshore trading company controlled by Binance CEO Changpeng Zhao, received around $11 billion (nearly Rs. 90,890 crore) of client assets through a Seychelles-based firm set up to take customer deposits, a US Securities and Exchange Commission filing shows.

The SEC filing, which on Tuesday asked a US court to freeze Binance’s US assets, came a day after the SEC sued Binance, its billionaire CEO Zhao, and the operator of its US affiliate exchange, for allegedly operating a “web of deception.”

In its 13 charges, the SEC alleged that Binance and Zhao used Merit Peak and Sigma Chain, another trading firm controlled by Zhao, to commingle corporate funds with client assets and use the monies “as they please.” This put customers’ assets at risk while Binance sought to “maximize” its profits, the SEC wrote in its civil complaint on Monday.

In response to the SEC’s lawsuit, Binance said it would defend its platform vigorously. “All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure,” it said in a statement on Monday. 

The funds received by British Virgin Islands-based Merit Peak between 2019 and 2021 flowed from Key Vision Development Ltd, also controlled by Zhao, the SEC filing on Tuesday showed.

The $11 billion sent from Key Vision to Merit Peak form part of the $22 billion (nearly Rs. 1,81,780 crore) in assets — mostly belonging to Binance and its US affiliate — that Merit Peak received between 2019 and 2021, the SEC filing on Tuesday showed.

Binance did not respond to Reuters’ emailed questions on the filing, and a spokesperson did not respond to a voice message.

Reuters reported last month that Key Vision and Merit Peak, along with Binance’s Cayman Islands holding company, formed the core of the global crypto exchange’s financial network. 

In response to that article, Binance denied mixing customer deposits and company funds, saying users who sent money were not making deposits but rather buying Binance’s bespoke dollar-linked crypto token. 

The SEC said in its lawsuit that Merit Peak, which described itself as trading with the “self-made wealth” of Zhao, operated on both the Binance.com and Binance.US platforms. 

The SEC said in the filing on Tuesday it could not determine why an entity “purportedly trading” on Binance.US with Zhao’s personal funds “acted as a ‘pass through’ account for billions of dollars of Binance Platforms customers’ funds.” 

Between 2019 and 2023, Sigma Chain’s US bank accounts received almost $500 million (nearly Rs. 4,130 crore), mostly from Binance and BAM Trading, with $15 million (nearly Rs. 120 crore) coming from Key Vision, the SEC’s Tuesday filing said. 

FX wires

The SEC’s filing on Tuesday gave further examples of how Binance and Zhao, one of the most prominent figures in crypto, allegedly moved “billions of dollars” through the United States.

Some Zhao-owned accounts have sent monies “offshore” over the last few months, the SEC wrote in the filing. 

Through 2022, a US account for a company called Swipewallet, of which Zhao is the beneficial owner, sent $1.5 billion (nearly Rs. 12,400 crore) in foreign exchange wires offshore, the SEC said in the filing without elaborating. The SEC said in such processes, dollars are converted to a foreign currency before transmitting to a beneficiary. 

Binance acquired Swipe, a digital wallet and debit card platform, in 2020. There have been no public posts on Swipe’s social media accounts since early last year. Swipe did not respond to a request for comment.

In some of the most detailed examples of the fund transfers by Binance and Zhao, the SEC’s filing on Tuesday alleged that on January 1 this year, $840 million (nearly Rs. 6,940 crore) was deposited into eight companies owned by Binance and Zhao, with $899 million (nearly Rs. 7,430 crore) withdrawn from those accounts “during that same time frame.” At the end of March, all but one of the accounts had a balance of zero, the SEC said. 

The SEC’s filing also said between January and March this year, multiple Binance bank accounts then wired over $162 million (nearly Rs. 1,340 crore) offshore to a foreign account belonging to a Singapore company beneficially owned by Binance’s back office manager, Guangying Chen, a close associate of Zhao. 

Binance did not respond to requests for comment on these alleged transfers.

Some money was also sent from Sigma Chain to Chen, the SEC said, without elaborating. Chen did not respond to Reuters’ requests for comment.

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Bankrupt Crypto Lender Voyager Digital Hopeful to Provide 35 Percent Customer Payout

Crypto lender Voyager Digital said Wednesday that customers will recover about 35 percent of their cryptocurrency deposits as the company winds down its operations after a failed buyout attempt by crypto exchange Binance.US.

US Bankruptcy Judge Michael Wiles approved Voyager’s proposed liquidation plan at a court hearing in Manhattan on Wednesday, allowing the company to return about $1.33 billion (nearly Rs. 11,000 crore) in crypto assets to customers and end its efforts to reorganize under Chapter 11.

Voyager filed for bankruptcy protection in July, citing volatility in cryptocurrency markets and a default on a large loan made to crypto hedge fund Three Arrows Capital (3AC).

Voyager suffered through two failed sale attempts during its bankruptcy. It initially sought to sell its assets for $1.42 billion (nearly Rs. 11,700 crore) to FTX, a deal that failed when FTX imploded in November. Binance.US stepped in with a $1.3 billion offer, but called off the deal on April 25, citing a “hostile and uncertain regulatory climate.”

Voyager customers’ recovery hopes are highly dependent on the outcome of litigation with FTX, which is seeking to claw back $445.8 million (nearly Rs. 3,670 crore) in loan repayments made to Voyager before FTX collapsed into bankruptcy.

If Voyager fully prevails in the FTX litigation, customers’ expected recovery would be 63.74 percent, according to Voyager’s court filings.

Voyager intends to repay customers with the same type of cryptocurrency that they had in their accounts. For deposits held in unsupported cryptocurrencies that cannot be withdrawn from Voyager’s platform and for Voyager’s proprietary VGX token, Voyager will instead repay customers using the stablecoin USDC.

Voyager was one of several crypto lenders to file for bankruptcy in 2022 after a boom in the COVID-19 pandemic. Others were Celsius Network, BlockFi, and Genesis Global Capital.

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Binance, Its US Partner Being Questioned for Regulatory Compliance and Finances

Three US Senators have asked giant cryptocurrency exchange Binance and its US partner Binance.US for information about their regulatory compliance and finances, citing a series of investigations by Reuters and some other media reports, according to a letter released on Wednesday.

In the letter, Democrats Elizabeth Warren and Chris Van Hollen along with Republican Roger Marshall, called on Binance “to provide transparency about potentially illegal business practice,” adding that the exchange and its related entities “have purposefully evaded regulators, moved assets to criminals and sanctions evaders, and hidden basic financial information from its customers and the public.

In a statement, Binance said that “a lot of misinformation has been spread about our company” but that “we appreciate the senators’ request” and that it will provide information to help them better understand the firm.

The senators also questioned the legitimacy of the company’s business and the safety of customers’ assets, in the letter addressed to Binance CEO Changpeng Zhao and Binance.US CEO Brian Shroder.

The collapse of rival crypto exchange FTX, whose founder Sam Bankman-Fried has been charged with fraud, “underscored the need for real transparency and accountability in the crypto industry,” the senators wrote.

Warren and Van Hollen are members of the Senate Banking Committee.

The letter cited Reuters articles from last year that found that Binance intentionally kept weak anti-money laundering controls, processed over $10 billion (nearly Rs. 82,400 crore) in payments for criminals and companies seeking to evade US sanctions, and plotted to evade regulators in the United States and elsewhere.

The letter also cited a Reuters report this February that Binance had secret access to Binance.US’s bank account and was able to move $400 million (nearly Rs. 3,300 crore)  to an account held by a trading firm managed by Zhao.

Binance.US publicly maintains that it is entirely independent of the global Binance.com exchange and operates as its “US partner.” However, Reuters has reported that, in fact, Binance created Binance.US as a de facto subsidiary to draw the scrutiny of US regulators away from Binance.com.

Binance has previously disputed Reuters’ articles, calling the illicit-fund calculations inaccurate and the descriptions of its compliance controls “outdated.” The exchange has said it is “driving higher industry standards” and seeking to “further improve our ability to detect illegal crypto activity on our platform.” A Binance.US spokeswoman said in February that “only Binance.US employees have access” to its bank accounts.

In the letter, first reported by the Wall Street Journal, the senators requested Binance and Binance.US provide documents and answers to their questions by March 16.

The senators are seeking information about the companies’ balance sheets, US-based users, anti-money laundering policies. They want written policies regarding Binance and Binance.US’s relationship.

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Binance Pulls Back on Potential Investments in the US, Confirms CEO Zhao

Binance has pulled back on some potential investments in the United States, its CEO Changpeng Zhao said on Friday, following a Bloomberg report that the major crypto exchange was considering ending relationships with US business partners.

“We pulled back on some potential investments, or bids on bankrupt companies in the US for now. Seek permission first,” Zhao wrote in a tweet, without elaborating.

The Bloomberg report, which cited an unnamed person familiar with the matter, said Binance is considering ending business relationships with banks and services firms in the United States, amid heightened regulatory scrutiny of the company.

Binance is also reassessing US venture capital investments and will consider de-listing tokens from any US-based projects, including the major stablecoin USD Coin, the report said.

Word that Binance may drop its US partners comes a day after Reuters reported that the global Binance exchange, which is not licensed to operate in the United States, had secretly moved more than $400 million (nearly Rs. 3,310 crore) from accounts held by its purportedly independent US partner. That money, according to company messages, was shifted to a trading firm managed by Binance CEO Zhao.

“Like every other blockchain company, we are conducting a careful cost-benefit analysis and will pivot our business as necessary to protect our global user base,” a Binance spokesperson said. The company did not immediately respond to questions on which US investments Binance had pulled back from.

US regulators have stepped up scrutiny of crypto companies this year. The regulatory action comes after multiple meltdowns in the crypto sector last year that saw a string of major industry players in the United States and beyond collapse.

On Monday, New York’s top financial regulator ordered the company behind Binance’s stablecoin to stop issuing the token.

Earlier this month Binance said it had suspended all dollar bank transfers after a US banking partner, Signature Bank, dialled back exposure to crypto firms.

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Binance’s US Partner Confirms Role of Trading Platform in Operating CEO Zhao’s Firm

The US partner of global cryptocurrency exchange Binance has confirmed that a trading firm managed by Binance CEO Changpeng Zhao operated as a market maker on its platform.

Reuters reported on Thursday that Binance had secret access to a bank account belonging to its purportedly independent US partner and transferred large sums of money from the account to the trading firm, Merit Peak.

“While there was a market making firm named Merit Peak that operated on the Binance.US platform, it stopped all activity on the platform in 2021,” Binance.US said in a tweet on Thursday after the Reuters story was published. It did not elaborate on when in 2021 the activity ceased, or comment on Zhao’s role at the trading firm.

The global Binance exchange is not licensed to operate in the United States but the transfers to Merit Peak revealed by Reuters suggest that Binance controlled the finances of Binance.US, despite saying publicly that the American entity is “fully independent” and operates as its “US partner.”

Binance transferred over $400 million (nearly Rs. 3,310 crore) from the account at California-based Silvergate Bank to Merit Peak between January and March 2021, Reuters reported on Thursday.

Before that story‘s publication, Binance.US had told Reuters that “Merit Peak is neither trading nor providing any kind of services on the Binance.US platform,” without giving further details.

Binance.US’s executives were concerned by the outflows from the Silvergate account to Merit Peak because the transfers were taking place without their knowledge, according to the messages reviewed by Reuters.

A spokesperson for the global Binance exchange, which did not respond to Reuters’ questions for the article on Thursday, told crypto news outlet CoinDesk that the transfers were “a Binance.US issue.”

The activities of crypto platforms’ market makers — firms that typically buy and sell assets at exchanges to deepen trading volumes — have come under growing scrutiny from US financial regulators since the collapse of major exchange FTX in November.

‘Tremendous Burden’

Zhao has not directly addressed the report, but on Friday he tweeted, “Remember 4,” tagging a previous post in which he listed his “Do’s and Don’ts” for 2023. The fourth item on the list was “Ignore FUD, fake news, attacks,” using an acronym for “fear, uncertainty and doubt” often used in crypto in relation to news perceived as negative.

The day before Reuters’ article, Binance’s chief strategy officer, Patrick Hillmann, told the Wall Street Journal and Bloomberg that Binance expected to pay penalties to resolve US investigations into the company. Hillmann said Binance had been built by software engineers unfamiliar with laws and rules on bribery and corruption, money laundering and economic sanctions, but earlier “gaps” in its regulatory compliance had since been closed.

“It’s a tremendous burden,” Hillmann told Bloomberg. “We just want to put it behind us.”

Hillmann did not respond to detailed questions Reuters sent him for the article that was published on Thursday.

Regulators are concerned that some market makers have received undisclosed special treatment from crypto exchanges that may disadvantage customers.

The US Securities and Exchange Commission accused FTX founder Sam Bankman-Fried in December of granting “special privileges” to his trading firm Alameda Research, allowing him to siphon off billions of dollars in FTX customer money. Bankman-Fried has pleaded not guilty.

The bankruptcy in 2022 of a string of major crypto firms has also stoked calls from politicians for greater clarity on how regulators assess ties between US banking and the cryptocurrency sector.

In December, US Senators Elizabeth Warren and Tina Smith wrote to top financial regulators including US Federal Reserve Chair Jerome Powell, asking about their assessment of the risks to banks and the banking system stemming from exposure to crypto. The letter cited Silvergate Capital Corp as among the banks that “relied heavily on their crypto customers.”

Shares in Silvergate Capital Corp, Silvergate Bank’s parent company, fell sharply on the Reuters report, closing down over 22 percent. They have lost nearly 90 percent of their value since hitting an all-time high in November 2021.

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