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Binance.US in Hot Water: Multiple States Revoke Money Transmitter Licenses

Published June 19, 2024 3:08 PM
Teuta Franjkovic
Published June 19, 2024 3:08 PM

Key Takeaways

  • Multiple US states are revoking or refusing to renew Binance.US money transmitter licenses.
  • The actions stem from compliance concerns with Binance US and Zhao’s guilty plea for violating anti-money laundering laws.
  • Binance claims the SEC crackdown on crypto has resulted in layoffs, arguing it harms American jobs and innovation.

Several US states, including North Dakota, Alaska, Florida, Maine, North Carolina, and Oregon, have either revoked or refused to renew Binance.US money transmitter licenses.

This action stems from compliance issues and legal problems associated with the company’s former CEO, Changpeng Zhao (CZ). North Dakota’s financial regulator highlighted  that these states took similar measures against BAM Trading Services’ Money Transmission License.

Binance.US Loses Licenses Across US for Compliance Issues

An increasing number of US states are withdrawing or choosing not to renew the money transmitter licenses of BAM Trading Services Inc., otherwise known as Binance.US, due to compliance issues and legal complications tied to its former CEO, Changpeng Zhao (CZ).

Most recently, the North Dakota Department of Financial Institutions announced  that it had revoked Binance US’s money transmitter license

According to  the regulator:

“The Commissioner has found that BAM Trading Services, Inc. has failed to comply with North Dakota laws. Additionally, majority beneficial owner and control person, Changpeng Zhao, has pled guilty to felony charges for violating the U.S. anti-money laundering laws.”

Zhao is presently serving a four-month prison sentence as a result of Binance’s settlement with the US Department of Justice (DOJ). He pleaded guilty to breaches of the Bank Secrecy Act. Under the terms of the plea agreement, Binance is required to pay $4.3 billion in fines and penalties. Originally, the DOJ sought a three-year sentence for Zhao.

Regulatory Crackdown Sweeps Across US

North Dakota’s financial regulator explained that money transmission activity involves receiving money or cryptocurrency to send to a location within or outside the United States on behalf of another person. To lawfully engage in the business of money transmission, one must obtain a license as mandated by North Dakota Century Code Chapter 13-09.1.

Other states have taken similar regulatory actions against Binance.US, revoking or not renewing its money transmitter license due to compliance issues. Florida suspended the license of Binance.US in November of the previous year, soon after Zhao admitted to violating US anti-money laundering laws.

At the start of January, Alaska chose not to renew the crypto exchange’s license. This was followed by North Carolina suspending it on January 23, and Maine refusing to renew it on January 29. Later, Connecticut suspended Binance.US’ license on April 24, and Oregon officially revoked it on April 30.

As per the North Dakota Department of Financial Institutions’ announcement:

“North Dakota joins Alaska, Florida, Maine, North Carolina, and Oregon who have taken similar actions to revoke or deny the renewal of BAM Trading Services’ Money Transmission License.”

Blaming SEC for Layoffs, Citing Lack of Cooperation Concerns

Binance.US reduced its workforce by about a third, laying off around 100 employees. Additionally, CEO Brian Shroder departed from the company last September.

Moreover, during legal proceedings, the SEC expressed concerns about Binance’s lack of cooperation in the discovery process. The regulator highlighted that Binance.US’s parent company submitted unintelligible screenshots and provided documents that were unsigned and undated.

In a statement , Binance attributed the recent layoffs to the Securities and Exchange Commission’s (SEC) crackdown on the crypto sector.

Binance’s spokesperson then stated that the SEC’s aggressive efforts to undermine the industry had tangible effects on American jobs and innovation, highlighting this as a regrettable consequence of such regulatory actions.

The claim by Binance that the SEC has endangered US jobs echoed recent criticisms directed at SEC chair Gary Gensler by Senate Republicans.

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