Binance.US Grapples with Revenue Plunge, Massive Layoffs Amid SEC Battle

March 9, 2024

A deposition in December unveiled last Tuesday revealed that Binance.US suffered a significant setback, grappling with a daunting 75% decline in revenue. Compelled to undertake drastic measures, the company terminated over two-thirds of its workforce—more than 200 employees, amid its legal tussle with the U.S. Securities and Exchange Commission (SEC).

Binance.US, the crypto trading platform catering to U.S. residents, was caught in the middle of a massive storm in June last year when the SEC filed 13 charges against Binance, its mother company. The accusations included mishandling customer funds and offering unregistered securities, with the SEC alleging that the company and its founder Changpeng Zhao engaged in an “extensive web of deception.”

Christopher Blodgett, the COO of Binance.US, revealed that the exchange witnessed approximately $1 billion in crypto and fiat assets leaving the platform immediately following the issuance of a Temporary Restraining Order (TRO). Blodgett testified that trading volumes and overall business had “imploded,” with revenues plummeting by around 75%.

The fallout extended beyond revenue loss, as the exchange also laid off 200 employees and faced challenges in retaining banking relationships. According to Blodgett, banks demanded substantial increases in collateral following the TRO, eventually leading to the termination of these relationships. Finding new banking partners proved difficult, as Binance.US became perceived as high-risk by financial institutions wary of potential SEC scrutiny.

“In the immediate wake of the TRO, our banks demanded drastic increases in collateral. But eventually, they fully terminated the relationship,” Blodgett said during the deposition.

Following the SEC’s legal action, Binance.US struggled to find new banking partners to work with, as the executive put it, “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.”

Additionally, the SEC’s legal action resulted in a tenfold increase in auditor expenses and a surge in legal costs to $10 million. Blodgett attributed the heightened audit costs to the increased risk associated with working with Binance.US post-TRO.

“Perceived risk of working with us. An auditor’s got to put their name and reputation on the line, so to speak, and the risk has just exploded since the TRO for them. And the cost, as I mentioned, is, I believe, 10X in, you know, the year since our last audit,” Blodgett explained when asked why the audit cost dramatically increased.

Describing the SEC lawsuit and restraining order as a “near-mortal blow,” Blodgett highlighted the significant impact on the company’s ability to secure partnerships. Consequently, Binance.US saw its network of partners dwindle from over 20 to less than five in the months following the SEC’s action.

Prior to Blodgett’s deposition, Binance.US announced in September last year that it had laid off 100 staff members. Coinciding with these layoffs, CEO Brian Shroder departed from the company.

The Daily Shib has reached out to Binance.US for an official comment on the matter. This article will be promptly updated upon receipt of their response.

The SEC lawsuit, which encompasses broader accusations of fraud, remains ongoing. Binance is actively pursuing the dismissal of the suit, a motion that was presented and argued before a federal judge in Washington, D.C., in January.

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