The SEC has issued a subpoena to Binance CEO Changpeng Zhao in the US District Court for the District of Columbia. Meanwhile, the SEC’s complaint against Binance.US includes statements from two of the firm’s former CEOs to the regulator. There are interesting details in the statements.
Binance CEO CZ summoned to District of Columbia court
cryptocoin.comAs you follow, the focus of the crypto market is the lawsuit filed by the SEC against Binance. According to a tweet from Fox Business reporter Eleanor Terrett today, the US Securities and Exchange Commission (SEC) has issued a subpoena to Changpeng Zhao, CEO of cryptocurrency exchange Binance. The subpoena Terrett shared gives Zhao and its associated companies 21 days to respond after successful service. If no response is received within this time, a judgment will be made against Zhao and his companies by default.
However, it is still unclear whether Zhao has been formally served the court papers. The possible consequences of the default decision could be significant for Zhao and Binance. It is possible that it will result in fines, penalties or other regulatory action that may affect the functioning of the cryptocurrency exchange. Meanwhile, CZ has yet to make a public comment on the situation.
The SEC’s order for Zhao to appear in court is a clear sign of increasing regulatory pressure on the burgeoning crypto industry. As the situation develops, market participants and observers will watch for Zhao’s reaction. They will also be keeping a close eye on their potential impact on Binance and the wider crypto market.
SEC filings include statements from former Binance.US CEOs
The files contain the experiences of Catherine Coley and Brian Brooks managing Binance.US. Also included are parts of their testimonies about the main obstacles they face in this job. The SEC’s complaint against Binance.US includes excerpts from statements given to the regulator by two of the firm’s former CEOs. One of them has remained silent since resigning in 2021.
The files contain portions of statements given by Catherine Coley and Brian Brooks about their experience leading Binance.US and the main obstacles they face in the business. The statement also refers to the influence of Binance Holdings, which operates the international Binance.com platform, on Binance.US and its operations, as well as the technology and resource sharing between the two.
First CEO of Binance.US
Catherine Coley was the first CEO of the US arm of the stock market. Coley assumed this role from 2019-2021, overseeing the company’s initial launch in the US. His sudden departure and the silence that followed has caused many to speculate about what happened during his tenure as CEO and why he left. Quotations of his testimony in the SEC filings shed some light on his experience. Coley told the SEC that he relied heavily on Binance.com’s resources and staff to launch the exchange. She also stated that the code for the platform was written entirely by Shanghai-based engineers.
He said this has become a “major problem point” in making the exchange independent of its international counterpart, as much of its codebase is written in Chinese. He added that despite bilingual proficiency, it was difficult to bring in US and Western engineers to work on the code. That’s why he noted that he’s focusing on areas that can quickly become independent, such as customer support. The quote did not specify the reason behind his departure or where he is now.
Matching engine
Coley also said that Binance.US used the same matching engine as Binance.com during its time there. He also confirmed that he did not remember signing Service Level Agreements for the exchange until January 2020, months after it began opening accounts for US users in September 2019.
Brian Brooks told the SEC that Binance.US has a team of around 50 engineers based in Shanghai. He initially stated that they are part of Binance.com. However, he noted that they were “tied” to Binance.US after the breakup in 2019. They operated in China under an organization called Boran, which he understood was the country’s unit of the stock market. Brooks said the exchange uses its matching engine under a license. He also stated that Binance.com does not directly control the platform through technology.
CZ was an economic counterparty
Brooks became CEO following Coley’s departure and served for about four months. He resigned in August 2021. He said this was due to “differences in strategic direction.” Brooks said he joined the company but quickly realized he wasn’t the CEO after many of the changes he proposed to fix the problems at Binance.US were abruptly “rejected” despite months of work. “What became clear to me at a certain point was that CZ was the CEO of BAM Trading, not me,” Brooks said in this context.
Brooks also said that CZ gave Binance.US an initial $10 million in funding, as a company cannot be founded without money. Brooks likened it to Hewlett & Packard funding themselves during their garage days. But the availability of funds was a “problem,” according to Brooks. Accordingly, Brooks said, “This indicated that the company was in fact highly dependent on CZ, not only as a controlling person but also as an economic counterparty.”
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