Binance’s US arm imploded following SEC allegations regarding violations of securities law, according to the subsidiary’s COO Christopher Blodgett.

In a recently disclosed deposition from Dec. 15, Blodgett said that the SEC lawsuit severely impacted the division, likening it to a “near-mortal blow.” As a result, the company was forced to lay off more than 200 employees since June, equating to about two-thirds of its workforce.

The  SEC sued Binance in June last year, naming co-founder Changpeng Zhao and BAM Trading, which operates Binance’s US branch, in the suit. The agency alleged that BNB and BUSD are unregistered securities. Additionally, BAM Trading’s staking program was described as an investment contract, falling within the SEC’s definition of a security.

By November, Binance agreed to a $4.3b settlement with the Department of Justice and the Commodity Futures Trading Commission for violations related to illicit finance. Despite this settlement, the SEC’s case against Binance remains unresolved.

Binance.US Saw Over $1B in Withdrawals Post Restraining Order

As part of its lawsuit, the SEC requested a temporary restraining order (TRO) against the entities. This was done to freeze funds until Binance.US could demonstrate that neither Binance nor its majority owner, Zhao, could access them.

Following the order, about $1b worth of assets, including crypto and fiat, were withdrawn from the platform, according to Blodgett. He further stated that the accusations significantly eroded institutional confidence in Binance.US.

“For example, prior to the TRO, we had… in excess of 20 market makers operating on the platform. Subsequent to that, the number is less than five,” he said.

Since the order, the subsidiary has lost two banking partners and hasn’t secured replacements, according to Blodgett. Revenue has dropped over 75%, while operating costs have surged and legal expenses amounted to about $10m, he added.

Binance.US Accused of Hiding Compliance Issues

Separately, the SEC claimed in court documents filed Tuesday that Binance.US is not cooperating with requests for information on customer assets and other matters.

Recent investigations have uncovered discrepancies in BAM’s initial claims of compliance with the Consent Order, SEC attorneys said. Changes made to processes and controls were not adequately disclosed, hindering the ability to verify compliance, they added. This has led to delays and incomplete information, hampering the efficiency of the investigation process, according to the filing.

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