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SEC Intensifies Scrutiny on Binance Operations and Key Personnel

The Securities and Exchange Commission (SEC) escalates its examination of Binance's adherence to a Consent Order, probing asset control and employee compensation.


  • Mar 06, 2024 17:08
SEC Intensifies Scrutiny on Binance Operations and Key Personnel

The United States Securities and Exchange Commission (SEC) has taken significant steps to increase its oversight of crypto exchanges and their compliance with federal laws. A recent development has seen the SEC deepen its investigation into Binance Holdings Limited and key figures associated with the company, including former CEO Changpeng Zhao.

The SEC's scrutiny hinges on a Consent Order issued to Binance, which required the crypto exchange to demonstrate that its US-based assets, including customer holdings, are within its sole possession and control. The regulatory body has raised concerns over Binance's compliance with this order, particularly in light of recent discoveries regarding asset control and employee remunerations by Binance-related entities.

Documentary evidence has surfaced, indicating that Binance Holdings Limited (BHL) may still retain some level of access and control over the private keys associated with customer and corporate assets. This contradicts Binance's assertions that they have exclusive control over these assets, as stipulated by the SEC's order. The SEC has called for BHL to produce documents explaining the technical operation and access controls of their wallet software.

Additionally, the SEC's probe has uncovered that numerous Binance employees based in the US have been receiving substantial compensation from entities affiliated with Binance, directly or indirectly. This raises questions about the independence of these employees from Binance Holdings and the potential influence of Binance on the operations of its US entity.

The SEC has also requested communication records between Binance and BAM Trading Services Inc. These records are crucial for understanding the nature of interactions and oversight between the entities, especially concerning the management and security of customer assets.

Binance Holdings and Zhao have reportedly been cooperative with the SEC's inquiries, agreeing to search and produce relevant documents. BHL has also tentatively agreed to make a technical fact witness available to testify on key topics central to the SEC's requests. Meanwhile, Zhao's position that his deposition is unnecessary due to his stepped-down role has been met with the SEC's insistence on his unique knowledge regarding the operations and financial relationships within Binance entities.

As the situation unfolds, the SEC's intensified efforts to ensure that Binance complies with the Consent Order reflect a broader regulatory trend of bringing transparency and accountability to the cryptocurrency industry. The outcome of this investigation may set a precedent for how crypto exchanges operate in the US and how they manage the delicate balance between innovation and regulatory compliance.

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