Gary Gensler’s Securities and Exchange Commission (SEC) called Binance.US “a cauldron of fraud” and used its power and influence to strangle the company’s banking relationships and dollar fiat ramps, despite failing to file There is no evidence to support his claims in court, the interim head of Binance.US told CoinDesk in an interview.
In June 2023, outraged by the shenanigans of the FTX crypto exchange, the SEC sued Binance and Binance.US, as well as its owner, Changpeng Zhao, on charges including violations of securities laws. Binance later agreed to a $4.3 billion settlement with US authorities and Zhao served a prison sentence.
Binance.US, which is a separate legal entity from Binance Global, was not involved in that deal at all. The company remains mired in litigation with the SEC today, having been forced to endure the last 18 months of being stripped by the attack on its business, operating as a crypto-to-crypto-only exchange.
“We will never receive compensation for the damage the SEC did to us,” said Binance.US interim CEO Norman Reed. “Within two weeks of that lawsuit, we had lost thousands of customers, billions of dollars went out the door, and then we were forced to lay off 70% of our staff. Institutions and banks walked away from us because the SEC said we were another fraudulent company like FTX. “It is ironic that a US financial regulator would essentially create a bank run on a company, which is what they did.”
Fortunately, there is light at the end of the tunnel for Binance.US. Reed said he expects dollar trust services to be revitalized and operational in the coming weeks; The company is poised for a dramatic comeback, seeking partnerships with banks and once again talking to state regulators.
Binance.US does not want or need to play the victim, Reed added, having continued stoically amidst restraining orders, reporting obligations, and the loss of banking partners. But in light of a new US administration and the end of Gensler’s ultra-vindictive leadership of the SEC, Reed – a former SEC regulatory official – wants to speak out about what he sees as an injustice.
“The Department of Justice looked at us, the U.S. Attorney’s Office for the Southern District looked at us. The CFTC looked at us. OFAC and FinCEN looked at us – and when I say ‘looked’ I mean they gave us a thorough examination – but they left us alone. We were out of what happened with Binance Global and CZ. The only entity that went after us was the SEC,” Reed said.
The debanking of crypto companies (and executives in some cases), known colloquially as “Operation Chokepoint 2.0,” has also become a topic of conversation lately, with the likes of a16z boss Marc Andreessen and director Ripple executive Brad Garlinghouse discussing it in public.
The debanking of Binance.US is Chokepoint in action, Reed said. It involved the SEC hitting exchange partners and creating fear with subpoenas. Once the lawsuit was filed, the reputational risk was too high and payment processors backed off because their correspondent banks were scared, he said.
“In the intervening period we approached hundreds of banks and financial institutions,” Reed said. “None of them would bank us. Because we were a cauldron of fraud, according to the SEC.”
Shortly after Binance.US was sued, the SEC attempted to put the company out of business with a temporary restraining order that would have frozen all of its assets, Reed said. The regulator claimed that Binance.US was defrauding its customers, abusing their accounts and sending money abroad.
“But in court the SEC lawyers were forced to say they had found no evidence of this,” Reed said. “Of course, that didn’t stop them from continuing to issue press releases about us. “They are supposed to be the good guys, the regulators, the ones who wear white hats.”
The only thing Binance.US has in common with Binance.com is that Zhao (widely known as “CZ”) remains the beneficial owner of both companies. Reed said it has been months since he spoke with Zhao, recalling the time when the then-Binance CEO asked him to take the lead at Binance.US.
“At that moment, I felt like I had been made captain of the Titanic after it hit the iceberg, only to go down with the ship,” Reed said. “But we did not give up and today we are a stronger company than ever. “I’ve been telling my team for over a year that when we save this company and make it successful again, this will be a case study of sorts.”
