Binance.US to halt dollar deposits after SEC crackdown (updated)

Signature Bank

09/06/2023 04:10

(Updates to recast paragraphs 1-3, add Binance.US assets in
paragraph 7, add banking details in paragraphs 10-11, add
comment in paragraphs 12-13 and update prices in paragraph
14-15)
    By Elizabeth Howcroft, Hannah Lang and Rae Wee
       June 8 (Reuters) - The U.S. affiliate of Binance said it
was halting dollar deposits and gave customers until Tuesday to
withdraw their dollar funds, after the U.S. securities regulator
asked a court to freeze its assets. 
    Binance.US, the purportedly independent partner of Binance,
said in a tweet on Thursday that its banking partners were
preparing to stop dollar withdrawal channels as early as June
13.
    The SEC sued Binance, its CEO and founder Changpeng Zhao,
and Binance.US's operator on Monday, in a dramatic escalation of
a crackdown on the industry by U.S. regulators. The SEC sued
major U.S. exchange Coinbase  COIN.O  a day later. 
    Binance.US said in the tweeted customer notice that it would
no longer accept dollar deposits as part of plans to change to a
"crypto-only exchange". It called the SEC's civil charges
"unjustified" and said it would "vigorously defend" itself.  
    The SEC alleged in 13 charges on Monday that Binance had in
a "web of deception" artificially inflated trading volumes and 
diverted customer funds, as well as failing to restrict U.S.
customers from its platform.
    The SEC on Tuesday asked a federal court to freeze Binance's
U.S. assets. Binance.US called the motion "unwarranted", saying
it had addressed SEC concerns over the safety of customer
assets.    
    The SEC said it had not received "sufficient reassurance"
that Binance.US's customer assets were controlled by its
operator, BAM Trading, "rather than under the control or
influence of Binance or Zhao, a person who has openly expressed
his desire to avoid compliance with U.S. law."
    Zhao and Binance had "free reign" to handle Binance.US
assets, the SEC said. "They have exercised this control over
U.S. investor assets with no oversight or controls to ensure
that those assets are properly secured," it added.  
    Binance did not immediately reply to a request for comment.
It has said it would "defend our platform vigorously," saying
the SEC was limited in reach as Binance was not a U.S. exchange.
    Binance.US's customer assets total more than $2.2 billion
held in crypto and some $377 million in U.S. dollar bank
accounts, the SEC said.
    
    'EXISTENTIAL THREAT'
    BAM Trading holds customer's funds directly with
California-based Axos Bank, according to a letter from lawyers
for BAM Trading to the SEC dated May 26, which was made public
by the SEC on Tuesday.
    Axos did not immediately respond to a request for comment
sent via email.
    Binance.US had struggled to find banking partners after the
failure of Signature Bank, the Wall Street Journal reported in
April.
    In its tweet on Thursday, Binance.US said crypto-denominated
trading, deposits, withdrawals and "staking" - where users
deposit cryptocurrencies for use in blockchain transactions -
would remain fully operational.   
    "This is very serious for Binance.US because Americans
cannot use Binance Global," said Clara Medalie, director of
research at Kaiko.
    "The inability for Binance.US to offer USD trading services
in a region the exchange was specifically built to operate in is
an existential threat."
    Crypto prices barely reacted to the news, with bitcoin
 BTC=BTSP  last trading up 0.4% at $26,610. It was headed for a
weekly loss of about 1.9%, after having dipped to an over
two-month low of $25,350 earlier in the week as the SEC
crackdown stoked nerves.
    Binance's BNB token, the world's fourth-largest,  BNB=CCCL 
slid 0.4% to $261.74. 

 (Reporting by Hannah Lang in Washington, Elizabeth Howcroft in
London and Rae Wee in Singapore; additional reporting by Tom
Wilson in London and Rahat Sandhu in Bengaluru; Editing by
Dhanya Ann Thoppil, Shri Navaratnam, Kim Coghill and Louise
Heavens)
 ((Rahat.Sandhu@thomsonreuters.com;))