SEC - Page 58

Binance, the largest cryptocurrency exchange worldwide, and Binance.US have negotiated an arrangement with the U.S. Securities and Exchange Commission (SEC). The agreement is intended to ensure all assets from U.S. customers remain domestically held until a significant lawsuit filed by the SEC is concluded.

The deal, revealed in court documents submitted on Friday, awaits the approval of the presiding federal judge in the case. As part of the agreement, only Binance.US employees will have access to these U.S. customer assets to prevent them from leaving the country.

Earlier this month, the SEC sued Binance, its founder and CEO Changpeng Zhao, and the operator of Binance.US. The SEC alleges that Binance manipulated its trading volumes, misappropriated customer funds, did not adequately restrict U.S. customers on its platform, and misled investors about its market monitoring measures.

This litigation, along with another one launched against major U.S. exchange Coinbase, marks an intensification of regulatory pressure on the cryptocurrency industry in the U.S.

The current agreement does not solve the SEC lawsuit. Instead, it stipulates that Binance.US will restrict Binance Holdings officials from accessing private keys for its diverse wallets and tools such as Amazon Web Services. This move is aimed at protecting customer assets.

On Saturday, the SEC affirmed that the emergency relief order obtained for Binance.US customers would protect their assets and enable ongoing withdrawal of assets. Gurbir Grewal, the SEC’s enforcement division director, stated the prohibitions were crucial for asset protection.

In response, a Binance spokesperson emphasized that user funds would remain safe and secure on all Binance platforms. The proposed agreement also includes plans for Binance.US to create new crypto wallets inaccessible to the global exchange’s employees and accelerate the discovery schedule.

Last week, the U.S. Binance affiliate ceased dollar deposits and set a deadline for customers to withdraw their dollar funds, following an SEC court request to freeze its assets.

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Facing accusations of violating securities laws from U.S. regulators, Binance.US, the American subsidiary of crypto behemoth Binance, has reportedly conducted a wave of layoffs. According to insiders and social media posts from employees, the layoffs come in response to the regulators’ charge and subsequent move to freeze the company’s assets.

While one source estimated the number of affected staff to be approximately 50, Reuters was unable to independently verify the figure or the seniority of the employees impacted. The firm’s spokesperson has yet to comment on the matter. Those reportedly dismissed primarily belong to the legal, compliance, and risk departments.

On June 5, the Securities and Exchange Commission (SEC) alleged Binance and its founder and CEO, Changpeng Zhao, of contriving Binance.US as a means to circumvent U.S. securities laws designed to safeguard American investors. The company responded with a commitment to vigorously defend itself. The SEC also brought a suit against BAM Trading, the operational entity behind Binance.US, accusing it of misleading investors about non-existent trading controls on its platform.

The next day, the SEC requested a federal court to freeze Binance.US’ assets, including over $2.2 billion in cryptocurrency and about $377 million in U.S. dollar bank accounts, over concerns that the funds could be transferred offshore. Binance.US has labeled the move as unwarranted and the allegations as baseless.

The CEO of Binance.US, Brian Shroder, noted in a communication to staff that the ongoing legal ordeal necessitated cost-cutting and organizational streamlining to maintain long-term viability. Two employees took to LinkedIn to confirm their exit from the company, with one attributing it to the layoffs.

Binance.US also alerted that its banking partners may cease dollar withdrawals as early as June 13, in light of the SEC’s hardline stance. Customers were encouraged to withdraw their funds, as the firm seeks to transition into a crypto-only exchange.

Despite avoiding layoffs in the past year, Shroder admitted that the actions of the SEC and their banking partners necessitated a change in approach. According to a court filing, BAM Trading argued that the SEC’s asset freeze request could effectively render the company inoperable, as it would be unable to meet its financial obligations and maintain its technological platform.

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The U.S. Securities and Exchange Commission (SEC) and Binance’s U.S. subsidiary, BAM Trading, have jointly sought a consent order, which could modify some restrictions from a previous SEC asset freeze directive against the company. This prospective consent order aims to provide more assurances to the SEC while enabling BAM Trading to meet payroll and other financial obligations.

The new order would permit BAM Trading and its management to continue purchasing goods and services, pay employee salaries, cover pre-existing benefits, professional fees, and other ordinary business expenditures. However, it strictly prohibits Binance from transferring any assets to or for the benefit of any Binance-affiliated entity or individual, under any circumstances.

In this context, the order specifically mentions that Binance CEO Changpeng Zhao should not have access to any assets belonging to BAM Trading or Binance.US.

The SEC had filed an emergency request to freeze BAM Trading’s assets following its lawsuit against Binance and Zhao. In response, BAM Trading submitted a counter-argument, insisting that the SEC’s reason for requesting the freeze failed to meet the necessary burden of proof set by the court.

As of now, the proposed consent order is awaiting court approval. It seems that disagreements over certain specifics between the SEC and Binance are causing some delay. The court has requested additional clarification from both sides.

Judge Amy Berman Jackson has asked both parties to propose any changes to the consent order for the court’s consideration by 1:00 pm Eastern Time on June 13, according to a document viewed on the Public Access to Court Electronic Records website. The court will decide on the consent order after evaluating the input from both parties.

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In a recent announcement, Robinhood, the popular app for trading cryptocurrencies and stocks, revealed that it will discontinue support for Cardano, Polygon, and Solana. This action comes in the wake of the United States Securities and Exchange Commission’s (SEC) recent lawsuits against crypto exchanges Binance and Coinbase for allegedly offering unregistered securities, including these three tokens.

In a June 9 update, Robinhood stated that it will cease support for these tokens from June 27 onwards, following an internal review. The decision was primarily influenced by the SEC’s lawsuits against Coinbase and Binance, which according to Robinhood, created an “uncertainty cloud” around the tokens.

The company expressed its belief in the future of crypto and pledged to continue advocating for clearer regulations in the U.S. crypto market, so as to foster confidence among participants.

On June 5, the SEC accused Binance of dealing in unregistered securities. Soon after, Coinbase was subjected to similar charges, with the SEC identifying 13 tokens, including Cardano, Polygon, and Solana, as unregistered securities.

Robinhood’s chief legal compliance and corporate affairs officer, Dan Gallagher, a former SEC commissioner, testified in a congressional hearing on June 6, saying that functioning as a registered broker-dealer in the U.S. was akin to taking the difficult route in crypto. Even though Robinhood attempted to follow the SEC’s guidelines, Gallagher highlighted the complexity of the journey.

The SEC’s actions have caused a stir in the crypto community, leading to debates on the regulator’s approach towards digital asset companies. The case against Coinbase claimed that the exchange had been operating as an unregistered security broker since 2019, despite the firm going public in April 2021.

Changpeng Zhao, CEO of Binance and Binance.US, was mentioned in the SEC lawsuits for their purported involvement in unregistered token offers and sales, including BNB. In response to what it called the SEC’s “extremely aggressive and intimidating tactics”, Binance.US announced the suspension of U.S. dollar deposits on June 8.

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Moody’s has recently downgraded Coinbase’s rating from “stable” to “negative”. This decision came as a response to the Securities and Exchange Commission’s (SEC) legal proceedings against Coinbase, accusing it of operating as an unauthorized securities broker.

Moody’s announcement on June 8 clarified that the downgrade reflects their apprehension about the SEC’s charges’ potential impact on Coinbase’s regular operations. They noted the “uncertain magnitude” of how these charges could influence the company’s business model and cash flows.

However, despite the negative outlook, Moody’s commended Coinbase’s robust liquidity. The agency highlighted the company’s $5 billion cash and equivalents as favorable, especially considering its $3.4 billion long-term debt. Furthermore, Moody’s anticipates that Coinbase will continue to manage its expenses efficiently, which has previously mitigated transaction revenue declines.

This revised outlook on Coinbase isn’t exclusive to Moody’s. Berenberg Capital, a financial services firm, also adjusted its stance, retaining its “hold” rating but reducing the price target for COIN shares from $55 to $39. Berenberg’s Mark Palmer explained that the price target cut is reflective of their perspective that Coinbase’s Q2 trading volumes, already weak, might “persist and intensify” due to the SEC’s charges.

Palmer pointed out the SEC’s desired outcome could necessitate an entire restructure of COIN’s primary business activities, such as its staking services. Consequently, he suggested investors refrain from short-term investment in Coinbase shares, labeling them “uninvestable in the near term”.

Despite the negativity, ARK Invest CEO Cathie Wood doesn’t appear overly concerned. She expressed to Bloomberg that the escalating regulatory examination of rival crypto exchange Binance could be advantageous for Coinbase over time.

Crypto exchange Binance and its founder, Changpeng Zhao, through their lawyers, have alleged that the current Chair of the United States Securities and Exchange Commission (SEC), Gary Gensler, once proposed to serve as an adviser to the company. This allegation is mentioned in documents filed by the SEC on June 7, as per a CNBC report.

However, contrasting reports from The Wall Street Journal from March suggest that Binance approached Gensler in 2018 regarding the advisory position. The report refers to messages and documents from 2018-2020, revealing that Ella Zhang, the then-head of Binance’s venture investing arm, and Harry Zhou, co-founder of Binance-invested firm Koi Trading, initiated the discussion with Gensler in October 2018. Gensler subsequently declined the offer.

Multiple private companies allegedly courted Gensler, who was a professor at MIT, for an advisory role, but he turned down all these proposals. In February 2021, he was nominated by President Joe Biden to head the SEC, officially taking office on April 17, 2021.

Binance is currently embroiled in a legal dispute with the SEC, which sued the crypto exchange on June 5 for failing to register as a securities exchange and allegedly operating unlawfully in the U.S. The regulator filed 13 charges against Binance, including unregistered offers and sales of the BNB and Binance USD tokens, along with its staking program.

Responding to the regulatory backlash, Binance issued a statement on June 7 asserting its distinction from other exchanges. The company emphasized its transparent wallet addresses, denied mishandling consumer funds, and claimed it had not made large political donations or entertainment and media sponsorships, an apparent jab at the now-collapsed exchange, FTX.

Binance’s founder, Zhao, sparked a Twitter debate on the same day, questioning why the SEC had not pursued FTX despite Gensler’s comments on the perceived similarities between the two entities.

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Sam Bankman-Fried, the former CEO of FTX, alleges that prosecutors have failed to deliver key evidence within the specified discovery timelines for his defense against numerous fraud charges. His lawyers communicated this concern to United States District Judge Lewis A.

Kaplan in a letter on June 5, stating that the government had not disclosed all contents from five electronic devices due by the end of March. These devices include a laptop and iPhone belonging to ex-Alameda Research CEO Caroline Ellison and a laptop owned by FTX co-founder Gary Wang.

With the trial date slated for Oct. 2, the defense expressed worries over the delayed provision of significant and substantial discovery material potentially affecting trial preparations.

Bankman-Fried faces charges of fraud, illegal political contributions, and alleged bribery to the Chinese government. He does not wish to postpone the trial, but additional motions might be filed if the newly discovered evidence necessitates it.

The defense letter also pointed out that the government has yet to provide information concerning FTX debtors. The letter indicated that this delay has a compounding effect on the defense’s trial preparedness. The evidence thus far is enormous, with five productions totaling over 3.6 million documents and over 10 million pages.

Amid these legal proceedings, FTX bankers, tasked with rescuing the troubled company, are said to be contemplating selling shares in a company within the burgeoning artificial intelligence sector. On June 6, Semafor reported that Perella Weinberg, an investment banking firm assisting the bankrupt exchange, has been promoting the sale of hundreds of millions of dollars of shares in AI startup Anthropic to potential investors. As per FTX balance sheets from its November 2022 bankruptcy, the company held $500 million worth of Anthropic stock, which is expected to be much more valuable given the current AI boom.

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