The US Securities and Exchange Commission (SEC) is accusing Binance.US of failing to comply with the regulator's requirements to provide information regarding the custody, security, and management of user funds.
The allegations come amid lawsuits against Binance Holdings Ltd. and BAM Trading Services (Binance.US) for violations of US securities laws.
The SEC's lawsuit, filed in 2023, alleges regulatory violations and questions whether Binance employees could control US client funds outside the United States.
The SEC has requested data to prove the conditions under which client funds are held, CoinGape reported. Judge Amy Berman Jackson signed a consent order requiring Binance.US to demonstrate to the regulator its control over user funds. However, the SEC has had difficulty obtaining information from Binance.US and said that Binance.US employees have been unwilling to provide all requested materials on asset control and management mechanisms.
Although Binance claimed compliance with the consent provisions, the SEC reports skepticism about Binance.US as it has autonomy over client assets. The stumbling block was the revealed access of Binance Holdings employees to client funds, specifically through control of Amazon Web Services servers where the wallet software for Binance.US is stored.
The SEC's investigation found problems with Binance.US's purported exclusive control over user funds.
Binance.US commented on the SEC's allegations, emphasizing its cooperation and providing evidence of its control over client funds. The exchange provides evidence of control over user assets and disputes the SEC's allegations. According to the crypto exchange, the disclosure of all information goes beyond the scope of the consent decree. Binance.US denies allegations that it improperly held and managed the funds of its clients.
Although Binance Holdings founder Changpeng Zhao no longer serves as CEO of Binance and Binance.US, his activities remain the subject of SEC investigations. Amid the ongoing lawsuits and investigations, the focus is on the security and transparency of Binance.US's management of client funds.
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