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Binance Faces Legal Storm As Lawsuit Alleges FTX Market Monopoly Maneuvers

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A class-action lawsuit was filed on Sunday in the District Court of Northern California, targeting Binance.US and its CEO, Changpeng Zhao. The suit, brought by California resident Nir Lahav, alleges multiple violations of federal and California laws related to unfair competition, with claims that Binance attempted to monopolize the cryptocurrency market to the detriment of its competitor, FTX.

The lawsuit revolves around tweets made by Zhao in early November, coinciding with FTX’s apparent struggles. On November 6, Binance announced the liquidation of its holdings in the FTX utility token, FTT. It was estimated that Binance held up to 5% of all FTT tokens at that time.

The day after the announcement, Zhao took to Twitter, stating that Binance had signed a letter of intent to acquire FTX. However, the deal was abruptly canceled just one day later. According to the lawsuit, Zhao’s public announcement of the deal’s withdrawal led to a “rushed and unprecedented collapse of FTX Entities.”

The lawsuit conte­nds that Zhao’s tweet on November 6th, stating “Due to recent re­velations that have come [sic] to light, we­ have decided to liquidate­ any remaining FTT on our books,” was deeme­d misleading and false. The reason is that Binance had already sold its FTT holdings. The­ plaintiffs argue that this tweet was inte­ntionally crafted to manipulate the marke­t price of FTT.

The lawsuit conte­nds that Zhao’s proposition to acquire FTX lacked sincerity and played a significant role in FTX’s subsequent downfall. It highlights the­ drastic decline of FTT’s value, plunging from US $23.1510 to US $3.1468, which ultimate­ly led to the bankruptcy of the FTX Entitie­s without sufficient chance for recove­ry.

Binance Navigate Regulatory Challenges

The lawsuit, base­d on seven counts, see­ks monetary damages, court costs, and the disgorge­ment of ill-gotten gains. Additionally, it suggests a pote­ntially sizable class consisting of thousands of members.

In response­ to the allegations, Zhao took to Twitter and clarifie­d that the situation did not involve any attempts to unde­rmine a competitor. Despite­ his statement, the cryptocurre­ncy community continued to speculate about the­ underlying motivations behind these­ events. Wee­ks passed with both exchange CEOs e­ngaging in public exchanges on the platform, fue­ling further discussions and debates.

Howeve­r, the ongoing legal challenge­s faced by Binance and FTX in the cryptocurre­ncy market become more­ complex with the addition of this class-action suit. They must navigate­ regulatory scrutiny and competitive te­nsions amidst these circumstances.

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Binance.US & SEC Lock Horns: Temporary Reprieve Amidst Legal Tussles

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Binance.US, the American arm of the world’s largest cryptocurrency exchange, secured a temporary respite from the U.S. Securities and Exchange Commission [SEC]. The development unfolded in a courtroom where Magistrate Judge Zia Faruqui played the role of mediator, urging both parties to collaborate while requesting the SEC refine its demands for an extensive inspection of the platform. Simultaneously, the judge pressed Binance.US to provide more comprehensive details about its custody solutions.

Judge Faruqui emphasized that his ruling was not intended to favor either party but to encourage cooperation and maintain the momentum of the proceedings. “I’m not going to order from the bench right now that they produce or not produce things. Let’s continue to try to work this out,” he remarked. “I just want to keep things moving.”

Binance.US

The backdrop of this legal skirmish is the SEC’s mounting pressure on Binance.US, with a particular focus on the exchange’s practices related to asset collateralization. The agency’s concerns were exacerbated by an auditor’s statement that expressed difficulty in ensuring the company’s full collateralization at specific points in time. Adding to the complexity of the situation were high-profile departures from the company and prior allegations of securities law violations, totaling 13 charges.

At the heart of the dispute lies the SEC’s insistence on obtaining extensive documentation pertaining to the firm’s internal control deficiencies regarding customer assets. Of paramount concern is Binance.US’s utilization of Ceffu, a custody service, which the SEC fears may violate a previous agreement designed to prevent assets from being hidden overseas.

The regulatory body accused Binance.US, operating under the name BAM Trading Services Inc., of making “half-hearted claims of irrelevance, prejudice, and burden.” While the American subsidiary initially agreed to cooperate, it later retracted, asserting that the SEC was making “unreasonable demands” in its quest for these documents.

Binance.US’ Next Hearing Set For Oct. 12

Representing Binance.US, attorney Matthew Martens argued vehemently against the SEC’s sweeping requests for documents, deeming them overly broad and impractical to fulfill. “Chasing down exactly how that software works is neither here nor there,” Martens contended. “That is foolishness. It’s not serious litigation,” he asserted during the latest hearing.

The judge, in an effort to maintain order and direction in the proceedings, set an October 10 deadline for a joint status report, with a subsequent hearing scheduled for October 12. The crypto community now watches with bated breath as these legal battles continue to unfold, as the outcome could significantly impact the future of cryptocurrency regulation in the United States.

Binance.US Struggles: Legal Battles & New Leadership Amidst Trading Downturn

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Trading activity on Binance.US, the American offshoot of the global crypto exchange Binance, has plummeted to historic lows this month as the platform grapples with an array of unprecedented challenges. 

According to data reported by Amberdata on The Tie Terminal, as of September 16th, trading volume on the exchange stood at a mere $5.09 million. It starkly contrasts the same day a year ago, when trading volume was approximately $230 million.

Source: The Tie Terminal/Amberdata

The decline in trading activity hit its bottom on September 9th, when Binance.US recorded a meager $2.97 million in trading volume. This sharp drop can be attributed to the Securities and Exchange Commission’s (SEC) lawsuit against Binance and Binance.US, filed on June 5th. 

The lawsuit file­d against the exchange alleged multiple­ violations, which included unregistere­d securities offerings and wash trading. In re­sponse, the SEC accused it of neglecting to registe­r as a broker-dealer and failing to re­gister its staking-as-a-service program.

In response­ to the lawsuit, Binance.US took action by suspending trading for more­ than 100 token pairs. This decision had a significant impact on the alre­ady declining exchange activity. Curre­ntly, the exchange faces internal challenges, grappling with a series of executive­ departures and layoffs.

Former Ripple Counsel Steps In As Interim CEO Of Binance.US

A glimmer of hope has emerged in the form of Norman Reed, former general counsel of Ripple, who has assumed the role of interim CEO at Binance.US. Reed played a significant role in the 2015 settlement between Ripple and the U.S. Department of Justice, which classified Ripple-linked XRP as a “convertible virtual currency.” 

Some experts view this appointment as a potentially positive development for the beleaguered exchange, although others remain cautious.

John Deaton, a pro-XRP attorney, commented on Reed’s appointment via Twitter, highlighting Reed’s involvement in the 2015 settlement and the government’s access to XRP sales data. Deaton noted that Norman Reed’s decision to stay with Binance.US amidst the turmoil could carry positive implications, though uncertainty still looms.

Nevertheless, the appointment of Norman Reed as interim CEO adds an intriguing twist to the unfolding drama at Binance.US. While some remain cautiously optimistic, uncertainty continues to shroud the exchange’s future.

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Binance.US Leadership Exodus Continues Amid Regulatory Heat: Report

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In the wake of mounting regulatory pressure, Binance.US, the American arm of the global cryptocurrency exchange Binance, is seeing yet another wave of high-profile departures. 

The most recent exits include Krishna Juvvadi, the company’s legal director, and Sidney Majalya, its chief risk officer, according to insider sources cited by The Wall Street Journal.

This news comes hot on the heels of the abrupt departure of Binance.US’s former president, Brian Shroder, and a significant reduction in the workforce as the exchange reels from a legal onslaught initiated by the U.S. Securities and Exchange Commission (SEC).

The SEC filed a lawsuit against Binance and its CEO, Changpeng Zhao (CZ), in June, leveling 13 charges, including operating as an unregistered exchange and attempts to evade U.S. securities laws. 

This legal battle has strained Binance.US’s relationships with banking partners, causing disruptions in U.S. dollar deposits and withdrawals. The exchange has publicly criticized the SEC’s tactics, describing them as “unreasonable” and “unduly burdensome.”

In a separate lawsuit, the Commodity Futures Trading Commission accused Binance of violating trading and derivatives rules. The exchange has also experienced a string of executive departures and layoffs.

Binance.US’s Troubles with SEC Probe

The most recent setback for Binance.US involves its alleged non-cooperation with the SEC in an ongoing probe. The SEC contends that the exchange’s staking, clearing, and brokerage services violate federal securities law. 

Federal regulators are particularly concerned about Binance.US’s use of Ceffu, a custody service provided by Binance’s international arm, which could potentially allow other entities within CZ’s empire to control U.S. customer assets.

Binance.US’s holding company, known as BAM, has faced criticism for providing limited and allegedly incomplete evidence during the discovery process. The SEC has raised questions about whether the exchange is violating a previous consent order meant to restrict access to customer funds to local U.S. staff only.

In response, Binance.US has downplayed the SEC’s concerns about Ceffu, stating that creating wallets as a provider of the Ceffu software does not imply custody or access to customer funds by the company’s international arm.

Nevertheless, the departures of top legal and risk officers Krishna Juvvadi and Sidney Majalya are seen as the latest casualties in Binance.US’s ongoing battle with U.S. regulators.

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Binance.US At A Crossroads: 3 Paths To Survival

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The trials and tribulations of Binance.US have become the epicenter of intense discussions, particularly in the wake of CEO Brian Shroder’s abrupt departure. The firm’s decision to undergo a significant downsizing, slashing roughly one-third of its workforce and terminating over a hundred positions, set off shockwaves throughout the industry. This restructuring marks the second round of job cuts in 2023, and it is primarily a response to the relentless regulatory headwinds that have disrupted the company’s once-thriving operations.

Now, the spotlight has shifted to none other than Binance’s co-founder, Changpeng “CZ” Zhao. Insiders familiar with the company’s inner workings have voiced concerns, speculating that as long as CZ maintains a formal connection to the business, its potential for expansion remains profoundly restricted. Zhao has been trapped in the SEC’s legal web, especially due to his association with the US subsidiary, which regulators allege gives him the capacity to manipulate customer assets at his discretion.

While CZ vehemently proclaims his innocence, the repercussions of these legal skirmishes have been nothing short of seismic. Shortly after the SEC’s allegations surfaced, Binance.US users found themselves unable to deposit or withdraw dollars as numerous banking partners severed their ties with the embattled platform. Consequently, sources opine that CZ’s continued involvement with Binance.US amid the current tumultuous regulatory landscape poses a formidable obstacle to the firm’s resurgence.

During an all-hands meeting at the company, three strategic options were presented, each accompanied by a set of subsequent actions. The first option advocated for the pursuit of planned growth initiatives, including the introduction of new products such as stocks and futures trading, as well as the acquisition of new licenses for derivatives trading.

However, the viability of this option hinged on Zhao’s ability to “resolve” his regulatory entanglements with the SEC and either place his holdings in Binance.US under a blind trust or divest himself of his shares entirely, as outlined in the presentation.

Binance Chief’s Silence Has Spark Concern

The second option proposed a moderate reduction in the company’s spending while directing investments toward bolstering the platform. Yet, this path required a willingness to inject capital into the company during the prevailing bear market conditions.

The final choice was the most conservative, suggesting that the company effectively enter a state of hibernation until there was substantial improvement in the firm’s overall situation. At this moment, there has been no response from Zhao, the co-founder of Binance, regarding the resignations of high-ranking executives, a fact that has raised concerns among observers.

Binance.US Counters SEC With “Unreasonable” Label Amid Ongoing Legal Battle

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In a recent development, Binance.US has struck back at the United States Securities and Exchange Commission (SEC), branding most of their requests as “unreasonable” and “unduly burdensome.” The crypto exchange’s response came just after both parties had concurred to file confidential information under seal.

Attorneys representing BAM Trading Services, the operator of the Binance.US cryptocurrency exchange, submitted documents on September 12 in opposition to the SEC’s quest for additional information. The SEC had previously sought many details from the Binance.US.

The defendants vehemently argued that the SEC’s demands for production and interrogatories extended far beyond reasonable boundaries, falling outside the consent order’s scope. BAM’s legal team contended that the SEC’s pursuit of absolute certainty, including the call for depositions of BAM CEO Brian Shroder and CFO Jasmine Lee, was utterly “unreasonable.”

In their counterargument, BAM’s legal representatives emphasized a crucial point: the SEC’s motion failed to provide any substantiating evidence implicating Shroder and Lee in overseeing customer asset custody and transfers within Binance.US.

Binance.US Challenges SEC And Enforces Protection

The legal team argued that BAM’s CEO and CFO need distinctive insights relevant to the specific areas specified in the expedited discovery clause of the consent order. They underscored BAM’s provision of more suitable witnesses, notably their Chief Information Security Officer, Erik Kellogg. The attorneys stated,

“The burden imposed by these depositions far outweighs their potential benefit, and the discovery sought is disproportionate to the needs contemplated by the consent order.”

The attorneys didn’t stop there. They contended that the SEC still needs concrete evidence to substantiate its unverified claims of asset diversion. According to the defendants, the SEC’s allegations forming the basis of their motion to compel are “misleading and mistaken.”

Moreover, BAM’s legal team emphasized a glaring disparity between the SEC’s “overbroad and abusive approach” and the constrained expedited discovery terms to which the regulator had previously agreed in the consent order.

Interestingly, BAM’s response came hot on the heels of a protective motion that both the SEC and Binance had concurred upon. This motion mandates submitting confidential information under seal, limiting access solely to parties such as the presiding judge, attorneys, plaintiffs, and defendants. This move signals a continued commitment from both sides to protect sensitive information while simultaneously battling it out in the legal arena.

The ongoing clash between Binance.US and the SEC remains a focal point for the cryptocurrency industry, as it could potentially set precedents for regulatory oversight in the United States. As both parties engage in this legal tango, the crypto community eagerly awaits the next twist in this high-stakes showdown.

Related Reading:| Binance.US Embraces Crypto-Only Exchange Model with USDT Transition

Binance.US Embraces Crypto-Only Exchange Model with USDT Transition

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In a bold move within the cryptocurrency industry, Binance.US has completed its transition to a crypto-only exchange, marking a significant departure from its earlier inclusion of USD as a base asset for transactions. This shift comes hand in hand with the adoption of USDT, a stablecoin pegged to the U.S. dollar, as the new base asset. The exchange’s recent announcement introduces an enhanced feature, “Buy & Sell Crypto With USDT,” accessible via their mobile app.

Source

This revamped feature empowers users to seamlessly engage with over 150 supported cryptocurrencies using USDT. Furthermore, to facilitate the funding of accounts with USDT, Binance.US has collaborated with third-party payment providers such as MoonPay. This strategic partnership enables users to access USD on-ramps, simplifying the process of purchasing USDT through various means like debit cards, credit cards, Apple Pay, and Google Pay.

Binance’s Milestone: Adapting to Crypto Landscape Evolution

The decision to embrace a crypto-only exchange model speaks to the broader industry trends that indicate a growing acceptance of cryptocurrencies as standalone assets and a push towards further decentralization. Binance.US’s transition emphasizes the viability and versatility of stablecoins like USDT, which not only offer a stable value tied to a familiar currency but also provide swift, low-cost transactions that are intrinsic to blockchain technology.

The Buy & Sell Crypto With USDT feature is a testament to Binance.US’s commitment to enhancing user experience and accessibility. By supporting various payment methods, the exchange not only caters to veteran traders but also opens doors for newcomers seeking easy entry into the cryptocurrency space. The partnership with MoonPay exemplifies Binance.US’s dedication to ensuring secure, efficient, and compliant avenues for users to convert traditional currencies into USDT and, subsequently, into a diverse range of cryptocurrencies.

However, this transformation isn’t without its nuances. While Binance.US’s crypto-only stance aligns with industry shifts, it raises questions about the potential impacts on users who relied on the USD trading pair. Additionally, the reliance on third-party payment providers introduces an element of reliance on external entities, which could pose concerns for those who prioritize a completely decentralized trading experience.

In conclusion, Binance.US’s transition to a crypto-only exchange marks a significant milestone in the evolution of cryptocurrency platforms. The shift to USDT as a base asset, coupled with the introduction of the Buy & Sell Crypto With USDT feature, reflects the exchange’s adaptability to the changing landscape. While the move aligns with industry trends and offers enhanced accessibility, users must carefully consider the potential implications of relinquishing USD trading pairs and relying on third-party partners. As the crypto ecosystem continues to evolve, Binance.US’s strategic choices highlight the ongoing metamorphosis of digital asset exchanges and the broader financial sector.

Binance.US: Crypto Depeg & Discounted Prices Raise Concerns, Future At Stake

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Cryptocurrencies listed on Binance.US, the US-based crypto exchange, are trading at discounted prices, creating what the crypto community calls a “crypto depeg” phenomenon. The value of the two most important digital assets, Bitcoin and Ethereum, is $27,500 and $1,700, respectively. These values reflect discounts of $3,000 and $200 from current prices worldwide.

Amidst the trading discounts, the popular stablecoin USDT remains depegged from the US dollar, with a value of $0.91. This situation follows the US Securities and Exchange Commission’s (SEC) lawsuit against Binance and the suspension of USD deposits and withdrawals. Other altcoins are also available at discounted prices on the Binance.US platform.

Binance.US: Discounted Crypto Prices and Concerns Amidst Liquidity Challenges

The discounted prices on Binance.US have prompted traders to seize arbitrage opportunities. Bitcoin (BTC) and Ethereum (ETH) prices experienced a 2% surge on the exchange. Traders took advantage of the price discrepancies by purchasing at lower prices and selling on alternative platforms at higher rates. However, it is essential to note that this arbitrage strategy can only be executed by individuals holding USD balances on Binance.US, as deposits have remained suspended for almost a month.

The crypto community has expressed concerns regarding the future of Binance.US, primarily due to a significant number of executives departing from the exchange. Respected veteran trader Peter Brandt criticized Binance CEO Changpeng Zhao (CZ) for the USDT depeg incident, referring to it as the “scam of the decade.” Brandt highlighted a past incident where Binance.US approved Bitcoin sell orders at $8,000 while the cryptocurrency traded at $60,000 on other exchanges. He emphasized the need for the community to question CZ about these occurrences.

Adam Cochran also cautioned the community against trading on Binance.US. He criticized CZ for contributing to market uncertainty, particularly as the US Department of Justice (DOJ) prepares to take legal action against the exchange. Cochran’s statement targeted those who blindly believe in CZ, stating:

“All you Binance simps that believe CZ is a god who would never let you down can deposit into Binance.US and get cheap coins any time you want.”

The broader crypto market is grappling with liquidity issues as investors continue to hold and balance their assets, resulting in decreased liquidity on exchanges. To address this concern, major global exchanges like Binance and Coinbase have implemented various strategies and promotions to increase market liquidity.

It is important to note that the last date for USD withdrawals on Binance.US is set for July 20, which adds further urgency to the crypto market’s liquidity challenges.

Binance.US is witnessing a “crypto depeg” situation, where cryptocurrencies trade at discounted prices. Bitcoin and Ethereum, in particular, are available at significant discounts. However, the ongoing issues surrounding Binance.US, including executive departures and the USDT depeg incident, have raised concerns about the exchange’s future. Liquidity remains a pressing issue for the broader crypto market, prompting exchanges to undertake efforts to boost liquidity. Traders and investors should stay vigilant and closely monitor developments as the landscape evolves.

Related Reading: | SEC’s Motives In Ripple Lawsuit Raises Concerns By Attorney John Deaton

Regulatory Storm: Binance.US Market Share Plunges While Coinbase Surges – Report

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In a major setback for Binance.US, the United States-based cryptocurrency exchange has witnessed a significant decline in its market share, dropping over 20% amidst an ongoing lawsuit from federal financial regulators. 

The SEC filed a lawsuit in June, accusing Binance.US, Binance, and CEO Changpeng “CZ” Zhao of being an unregistered securities exchange. In March, the Commodity Futures Trading Commission also sued the exchange and CZ for the same reason.

According to a report, recent data from Kaiko, a leading data provider, reveals that Binance.US’s market share in the U.S. plummeted from a commanding 22% in April to a meager 0.9% as of June 26. 

On the other hand, Coinbase, a rival of Binance.US, has observed a different trajectory. Despite being confronted with an SEC lawsuit similar to Binance.US, Coinbase encountered a notable upswing in its market share within the United States, with an approximate 7% surge recorded in June.

According to the report, Coinbase experienced a significant increase in its market share, surging from approximately 48% to 55% within the specified timeframe. Analysts credit this growth to Coinbase’s collaboration as a surveillance partner with asset managers aiming to introduce a Bitcoin exchange-traded fund (ETF) focused on spot trading in the United States.

This partnership likely contributed to the increased confidence and trust in Coinbase as a reliable cryptocurrency exchange.

Binance’s Global Market Share Declines 

On a global scale, the world’s largest cryptocurrency exchange has experienced a decline in its market share as well. Data from Kaiko indicates that Binance’s global market share decreased from 60% at the beginning of the year to 52% following the SEC lawsuit. 

This decline started in March when Binance discontinued zero-fee transactions for select trading pairs, prompting traders to migrate to alternative platforms. Bybit and OKX emerged as the primary beneficiaries, capturing a significant portion of the market share that Binance relinquished.

The regulatory scrutiny and subsequent decline in market share raise important questions about the future of cryptocurrency exchanges and the need for clear regulatory frameworks. 

Crypto companies argue against classifying crypto tokens as securities and have repeatedly urged the SEC to establish unambiguous guidelines. 

This ongoing legal battle and the regulatory crackdown have also impacted spot trade volumes, which experienced a significant slump in the second quarter, reaching their lowest levels since 2020. 

Nevertheless, as the legal battles continue, the outcomes of these lawsuits and the subsequent regulatory decisions will undoubtedly shape the future of cryptocurrency exchanges and their market shares.

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Binance.US Escapes Temporary Restraining Order, Spot Trading Volume Plummets 70%

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Binance, the world’s largest cryptocurrency exchange, has been embroiled in a dispute with the Securities and Exchange Commission (SEC) for several weeks. Recently, the SEC initiated a lawsuit against the world’s biggest exchange, causing concerns across various aspects of the exchange’s operations. Consequently, Binance’s spot trading volume has experienced a significant decline.

Additionally, the SEC filed a request for a temporary restraining order against Binance.US. However, this specific request was dismissed by Judge Jackson as part of the legal proceedings. It is noteworthy that Binance has also taken steps such as submitting an application for deregistration as a crypto service provider in Cyprus and withdrawing its license application in Austria.

During the ongoing legal dispute, insiders familiar with the situation have revealed that 50 employees were let go. These anonymous sources disclosed that the affected staff members belonged to Binance.US’ legal, risk, and compliance department.

In an effort to address the imposed restrictions on the exchange, CZ’s platform and the SEC were directed to participate in a mediation meeting held yesterday. The lawsuit brought by the SEC against Binance has also contributed to spreading fear, uncertainty, and doubt (FUD), consequently leading to a decline in market prices. Additionally, the SEC has filed a lawsuit against Coinbase, the largest cryptocurrency player in the United States.

According to the most recent analysis, CZ’s exchange has experienced a decline in spot trading volume during the second quarter of 2023, amidst the ongoing lawsuit.

Lowest Spot Trading Volume in Years for Binance


A recent research report from Kaiko reveals that the leading cryptocurrency exchange has experienced a significant decline of 70% in its combined spot trading volume. The data indicates that the volume has reached its lowest point, which has not been observed since the fourth quarter of 2020.

It’s important to note that Binance is not the only exchange affected by this situation. The report highlights that Coinbase, Kraken, and OKX have also suffered a drop of over 50% in their spot trading volume. One of the main factors contributing to this decline could be the regulatory uncertainty prevailing in the United States.