Gary Gensler’s Securities and Exchange Commission (SEC) labeled Binance.US as “a cauldron of fraud” and used its power and influence to stifle the firm’s banking connections and USD fiat ramps, despite providing no evidence to support its allegations in court, the interim head of Binance.US told CoinDesk in an interview.
In June 2023, outraged by the harassment of the crypto exchange FTX, the SEC sued Binance and Binance.US, as well as their owner Changpeng Zhao, on charges that included violations of securities laws. Binance later agreed to a $4.3 billion settlement with US authorities, and Zhao served some prison time unrelated to the SEC’s case.
Binance.US, which is a separate legal entity from Binance Global, was not involved in that settlement at all. The firm remains mired in litigation with the SEC today, having been forced to endure the past 18 months of being rebuffed by the attack on its business, which operates as a crypto-to-crypto exchange.
“We will never be compensated for the damage the SEC has done 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 we were later forced to lay off 70% of our staff. Institutions and banks ran away from us because the SEC said that we were another fraudulent company like FTX. It’s ironic that a US financial regulator would essentially create a bank operation within a company, which is what they did.”
Fortunately, there is light at the end of the tunnel for Binance.US. Reed said he expects to get USD fiat services back up and running in the next few weeks; the firm is poised for a dramatic comeback, courting partnerships with banks and in dialogue with state regulators again.
Binance.US doesn’t want or need to play the victim, added Reed, who has stoically led the way amid bans, 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 at the SEC, Reed – himself a former SEC regulator – wants to speak out about what he sees as an injustice.
“The DoJ looked at us, the US 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 investigation of us – but they left us alone. We were out of the loop with what happened to Binance Global and CZ. The only entity that went after us,” Reed said.
The debanking of crypto companies (and leaders 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 publicly .
The liquidation of Binance.US is Chokepoint in action, Reed said. This involved the SEC hitting the exchange’s partners and spreading fear with subpoenas. When the lawsuit was first filed, the reputational risk was too high and payment processors pulled back thanks to their correspondent banks being intimidated, he said.
“In the intervening period, we approached hundreds of banks and financial institutions,” Reed said. “None of them wanted to beat us. Because we were a pot of fraud, according to the SEC.”
Shortly after Binance.US was sued, the SEC tried to put the firm out of business with a temporary restraining order that would have frozen all of its assets, Reed said. The regulator alleged that Binance.US defrauded customers, misused client accounts and sent 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 from continuing to issue press releases about us. They’re supposed to be the good guys, the regulators wearing the white hats.”
The one thing Binance.US has in common with Binance.com is that Zhao (commonly known as “CZ”) remains the beneficial owner of both companies. Reed said it’s been months since he spoke with Zhao, recalling when the then-Binance CEO asked him to take over leadership of Binance.US.
“At the time, I felt like I had been nominated to captain the Titanic after it hit the iceberg, to go down with the ship,” Reed said. “But we did not give up and we are a stronger company today than we have ever been. I’ve been telling my team for over a year that when we save this business and actually make it successful again, this is going to be a case study of sorts.”
