The US government requested last week to modify the bail conditions of Binance founder Zhao Changpeng (CZ) before his sentencing, including requirements to report travel plans and surrender his passport to a third-party custodian supervised by his registered lawyer. However, CZ’s lawyers refused the request. On Tuesday, the US Securities and Exchange Commission (SEC) accused Binance.US of non-compliance in providing crucial information and requested court intervention.
Binance reached a historic settlement agreement in November last year with the US Department of Justice, the Commodity Futures Trading Commission (CFTC), and other institutions, admitting guilt and agreeing to pay a $4.3 billion fine. Founder Zhao Changpeng (CZ) acknowledged charges of violating US anti-money laundering laws, resigned as CEO of Binance, and paid $175 million for bail. However, his multiple requests to return to his home in the United Arab Emirates were rejected by the court.
According to Blockworks, the US government sought to modify CZ’s bail conditions before his sentencing hearing in April. The Department of Justice stated in a court filing on the 1st that the government wanted CZ and his defense team to report his travel plans, as they were concerned that CZ, as a Canadian citizen, might travel to the US-Canada border. The government also requested that Zhao surrender his Canadian passport to a third-party custodian employed and supervised by his registered lawyer, which would prevent him from applying for or receiving a new passport.
However, CZ’s defense team requested the judge to reject the government’s modification order, arguing that CZ’s travel to the US had not been an issue so far. Additionally, the government also requested CZ to maintain his residence, but this request was opposed by CZ’s lawyers. The government argued that this was a “standard, commonsense request” and Zhao could not be exempted.
Despite reaching a settlement agreement with the US Department of Justice, the CFTC, and other regulatory agencies, which was approved by the court on March 24th, the lawsuit between Binance and the US Securities and Exchange Commission (SEC) remains unresolved. The SEC sued Binance and Zhao Changpeng in June last year, alleging violations of US securities laws and presenting 13 charges, including operating an unregistered exchange and illegally offering and selling securities to US investors.
According to Cointelegraph, in a court filing made public on the 5th, SEC lawyers informed the judge that BAM Trading Services (Binance’s US operations under the name Binance.US) did not cooperate with an ongoing investigation and was “unable or unwilling” to provide sufficient information regarding the custody of client assets. Therefore, the organization requested court intervention to expedite the gathering of evidence. SEC lawyers wrote:
“The core of the SEC’s investigation is whether employees of Binance, a non-U.S. affiliate, retained access to Binance.US customer assets. The SEC contends that Binance.US has failed to demonstrate that Binance globally lacks access to private keys or other forms of accessing customer assets.”
In the report, Binance.US refuted the SEC’s allegations, stating that it has complied with all “extensive” information requests made by regulatory agencies and claimed that the SEC’s demands for information exceeded the scope of the June court order approving expedited discovery. Binance.US requested the court to end the expedited discovery process.
Binance is still seeking to have the SEC’s lawsuit dismissed, but the judge has not yet agreed. However, the legal battle with the SEC has left Binance.US in a “collapse” situation.
According to Fortune, Christopher Blodgett, the Chief Operating Officer of Binance.US, revealed in his testimony on Tuesday that due to the SEC’s actions, the company has been forced to lay off over 200 employees since June, which accounts for two-thirds of its workforce.
In the filing, he described the lawsuit and restraining order as a “near-fatal blow,” weakening the platform’s ability to seek partners, including banks and market makers. In the months following the lawsuit, the number of partners has dropped from over 20 to less than 5. Since August last year, Binance.US has partnered with MoonPay for USD deposits, as payment and banking partners suspended their support for the platform’s USD deposits and withdrawals.
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