Gary Gensler’s Securities and Exchange Commission (SEC) branded Binance.US “a cauldron of fraud,” and used its power and influence to choke off the firm’s banking relationships and USD fiat ramps, despite failing to produce any evidence to back up its claims in court, the interim chief of Binance.US told CoinDesk in an interview.
In June of 2023, incensed by the chicanery of crypto exchange FTX, the SEC sued Binance and Binance.US, as well as their owner Changpeng Zhao for charges that included violations of securities laws. Later, Binance agreed to a $4.3 billion settlement with U.S. authorities, and Zhao served some jail time.
Binance.US, which is a separate legal entity from Binance Global, was not involved in that settlement at all. The firm remains locked in litigation stalemate with the SEC today, having been forced to endure the last 18 months denuded by the assault on its business, operating as a crypto-to-crypto only exchange.
“We’ll never get recompense for the damage the SEC did to us,” said Binance.US’s interim CEO Norman Reed. “Within two weeks of that lawsuit, we’d lost thousands of customers, billions of dollars went out the door and we were later forced to lay off 70% of our staff. Institutions and banks ran away from us because the SEC said we were another fraudulent firm like FTX. It’s ironic that a U.S. financial regulator would essentially create a bank run at a company, which is what they did.”
Thankfully there’s light at the end of the tunnel for Binance.US. Reed said he expects to have USD fiat services revitalized and working in the next few weeks; the firm is poised for a dramatic comeback, courting partnerships with banks and in dialogue with state regulators once more.
Binance.US doesn’t want or need to play the victim, Reed added, having stoically carried on amid restraining orders, reporting obligations and the loss of banking partners. But in light of a new U.S. administration and the end of Gensler’s ultra-vindictive leadership at the SEC, Reed – himself a former regulatory officer at the SEC – wants to speak out about what he sees as an injustice.
“The DOJ 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 they ‘looked,’ I mean they did a thorough examination of us – but they all left us alone. We were outside of what happened to Binance Global and CZ. The only entity that went after us was the SEC,” Reed said.
The debanking of crypto businesses (and executives in some cases), known colloquially as “Operation Chokepoint 2.0,” has also become a talking point of late, with the likes of a16z boss Marc Andreessen and Ripple CEO Brad Garlinghouse discussing it in public.
The debanking of Binance.US is Chokepoint in action, Reed said. It involved the SEC hitting up the exchange’s partners and fear mongering with subpoenas. Once the lawsuit was brought, the reputational risk was too high and payment processors backed away thanks to their correspondent banks being spooked, 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 firm out of business with a temporary restraining order that would have frozen all its assets, Reed said. The regulator claimed Binance.US was defrauding clients, abusing client accounts and sending money overseas.
“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 continuing to issue press releases about us. They are supposed to be the good guys, the regulators, wearing the white hats.”
The one thing Binance.US does have in common with Binance.com is that Zhao (widely known as “CZ”) remains the beneficial owner of both firms. Reed said it’s been months since he spoke to Zhao, recalling the time the then-Binance CEO asked him to take over the lead at Binance.US.
“At the time, I felt like I’d been nominated captain of the Titanic after it hit the iceberg, to go down with the ship,” Reed said. “But we didn’t give up, and we’re a stronger company today than we’ve ever been. I’ve been telling my team for over a year that when we save this company and actually make it successful again, this will be some kind of case study.”
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