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Binance US, the US-based entity separate from its global parent company, has announced a significant reduction in its workforce. Approximately 200 employees will be laid off, representing two-thirds of its staff.
This decision follows actions taken by the Securities and Exchange Commission (SEC) last year, as reported by Coindesk.
Financial Impact and Legal Challenges
According to a recent court filing, the crypto exchange revealed that it experienced a significant outflow of assets totaling $1 billion from its platform following the SEC's temporary restraining order (TRO). This outflow resulted in a staggering 75% reduction in platform revenue, prompting the need for layoffs.
Christopher Blodgett, an executive at Binance.US, stated in a deposition in December 2023 that the immediate aftermath of the TRO saw a substantial exodus of assets from the platform, both in crypto and fiat.
The SEC has filed charges against Binance, its global arm, its US unit, and former CEO Changpeng Zhao, accusing them of mishandling customer funds and offering unregistered securities. While Binance has settled charges with federal prosecutors and the US commodities regulator, its legal battle with the SEC continues.
According to Finance Magnates, in a recent court filing, the SEC alleged that BAM Trading Services, operating as Binance.US, has been uncooperative in providing details of customer assets as part of the discovery process, leading to a stalemate.
Trading View said the exchange's legal expenditures surged to $10 million, and its auditor expenses have increased tenfold. This financial strain is compounded by the loss of banking relationships, which limits customers' ability to convert their digital assets into fiat.
Escalating Costs and Banking Challenges
Blodgett further disclosed that the exchange's legal expenses skyrocketed to $10 million while auditor expenses increased tenfold. Additionally, Binance.US faced challenges with its banking relationships for converting crypto and fiat currencies.
Following the TRO, banks demanded significant increases in collateral, eventually leading to the termination of relationships. This prevented customers from depositing and withdrawing fiat from the platform, severely impacting its operations.
Blodgett emphasized the challenging relationship with banks, describing it as "radioactive," as any association with Binance.US may invite SEC subpoenas.
Photo: Dylan Calluy/Unsplash
