The American branch of Binance experienced a 75% drop in revenue and laid off 200 employees following the filing of a lawsuit by the SEC against the cryptocurrency exchange, according to court documents.
In June 2023, the regulator brought 13 charges against Binance, including the unregistered offering of securities in the form of digital tokens. The allegations also involved the exchange’s U.S. branch and the company’s CEO, Changpeng Zhao, as a “controlling person.”
As part of the lawsuit’s enforcement measures, the SEC requested the court to impose several restrictions on the defendants, including a freeze on assets. Although the court denied this request, it negatively impacted the American branch’s business, stated Binance.US COO Christopher Blodgett during testimony in December.
“Immediately after the TRO was implemented, we found that $1 billion in fiat and cryptocurrencies left the platform,” he said.
The outflow led to a 75% revenue loss and the dismissal of two-thirds of the staff. According to the manager, legal expenses increased to $10 million, and auditor costs rose “tenfold.”
“After the TRO, banks demanded a sharp increase in collateral from us. Ultimately, they completely severed ties. As a result, our clients lost the ability to make fiat deposits and withdrawals, effectively strangling the business,” noted Blodgett.
He added that new banking partners could not be found, as the platform became “radioactive” to them.
From a document published on March 5, it became known that the SEC suspects Binance.US of reluctance to properly disclose information. The Commission requested court assistance.
Blodgett noted in his testimony that the staff reduction affected the company’s ability to process requests due to limited resources.
In November 2023, Binance settled claims with U.S. authorities by agreeing to pay $4.3 billion. The SEC was not involved in the deal.
Changpeng Zhao pleaded guilty to violating the Bank Secrecy Act and agreed to step down as CEO. His fine amounted to $50 million. Additionally, the former head of the exchange posted a $175 million bond to remain free until sentencing. The court is expected to deliver a verdict in April.
Back in December, following the publication of several court documents, former SEC employee John Reed Stark predicted “tough times” for Binance due to “exorbitant expenses” on auditing and legal services.