Binance.US Cut Off Two-Thirds of Staff; Revenue Declined By 75% after SEC Lawsuit: COO

The Securities and Exchange Commission’s (SEC) legal action against Binance.US last year dealt a severe blow to the cryptocurrency exchange’s US operations, leading to mass layoffs and a staggering revenue decline, according to testimony from a top executive.

In a recently disclosed deposition, Christopher Blodgett, the Chief Operating Officer of Binance.US, revealed the devastating impact of the SEC’s lawsuit on the company’s operations. 

He likened the SEC’s allegations and subsequent temporary restraining order (TRO) to a “near-mortal blow” that severely undermined institutional trust in the platform. 

“The allegations of the SEC severely undermined institutional trust in our platform,”

Blodgett stated during the deposition.

Massive Layoffs and Revenue Plunge

Following the SEC’s legal action in June last year, Binance.US was forced to lay off more than 200 employees, representing approximately two-thirds of its workforce. 

Blodgett stated that in the immediate aftermath of the TRO, the platform witnessed an exodus of around $1 billion in assets, including cryptocurrencies and fiat currencies, after the fine of 4.3 Billion paid in November last year. 

“In the immediate aftermath of the TRO, we saw somewhere in the neighborhood of $1 billion of assets flee the platform, crypto, and fiat,”

he said.

The loss of customer funds and the erosion of institutional confidence in the exchange resulted in a staggering 75% decline in revenue for Binance.US. 

“Our trading volumes and business more generally have imploded,”

Blodgett remarked. 

Additionally, the company’s legal expenses skyrocketed to $10 million, while auditor expenses increased tenfold, further exacerbating the financial strain.

Related: Binance CEO CZ to Step Down, Company to Plead Guilty and Pay $4.3 Billion in Anti-Money Laundering Case

Loss of Banking Partners and Fiat Payment Rails

Blodgett’s testimony also highlighted the challenges Binance.US faced in maintaining banking relationships and fiat payment rails. 

In the wake of the SEC’s action, the company’s existing banking partners demanded drastic increases in collateral and eventually terminated their relationships altogether.

“In the immediate wake of the TRO, our banks demanded drastic increases in collateral. But eventually, they fully terminated the relationship. As a result, our customers were prevented from depositing and withdrawing fiat to the platform, effectively choking the business,”

Blodgett stated, underscoring the severe consequences of losing access to traditional financial infrastructure.

Struggle to Regain Trust and Find New Partners

The loss of institutional trust and the SEC’s scrutiny have made it difficult for Binance.US to find new banking partners willing to work with the exchange. Blodgett acknowledged the company’s precarious position saying;

“To banks, we’re radioactive. Who can blame them? The second it becomes known that they’re working with Binance.US, they can reasonably expect a nasty subpoena from the SEC.”

The SEC’s lawsuit, which alleges violations of securities laws, including the unregistered offering of the BNB token and the BUSD stablecoin, has cast a long shadow over Binance.US’s operations. 

Despite Blodgett maintaining that “no actual wrongdoing” was involved, the company faces an uphill battle to regain trust and rebuild its operations in the United States.

This legal battle between Binance and the SEC is yet to be over. The impact on Binance.US’s workforce, revenue, and ability to operate effectively in the US market remains severe. 

This case must be closely watched, as it could have far-reaching implications for the future of digital asset exchanges and their regulatory compliance. Especially now with the significant dip from yesterday’s market events and the up trend in the crypto jobs. 

Read Also: SEC Raises Concerns Over Binance.US Cooperation in Securities Law Probe