Binance.US Not Playing Ball With Probe, SEC Says, as Focus Turns to Custody Arm Ceffu

Binance.US has been accused of not cooperating in a probe by the Securities and Exchange Commission, which has said the company’s staking, clearing and brokerage services violate federal securities law, in court filings unsealed Thursday.

Federal U.S. regulators worry the crypto exchange’s use of Ceffu, a custody service it links to Binance’s international arm, violates a previous deal intended to stop assets being squirreled overseas.

Binance.US’ holding company, known as BAM, has provided “only approximately 220 documents ... many that consist of unintelligible screenshots and documents without dates or signatures,” the SEC said, of the process of evidence-gathering known as discovery.

“The limited discovery BAM has provided to date raises questions about whether defendants are in violation of the consent order,” referring to an earlier legal deal to ensure only local U.S. staff have access to funds, added the document, which appears to be a partially unsealed version of one filed in August.

The SEC is worried about the company’s use of Ceffu, as it says the wallet custody software is affiliated with international entity Binance Holdings Ltd, meaning other entities in Changpeng “CZ” Zhao’s empire could have control over U.S. customer assets.

In a previous Sept. 12 filing, Binance.US called the regulator’s concerns over Ceffu “much ado about nothing,” and its demand for more documents a “futile fishing expedition.”

Merely creating wallets as provider of the Ceffu software doesn’t mean the company’s international arm has custody or access to customer funds, Binance.US said.

Ceffu is the new name for Binance Custody, which started operating in December 2021 and rebranded in February 2023.

In a statement sent to CoinDesk after this story was published, a spokesperson for Ceffu who declined to identify themselves, stressed separation from Binance, saying the entity had "always operated as an independent and separate wallet solution offered to institutional clients" and runs as a "fully independent third-party technology service provider."

Terms of service on the Ceffu website suggest its legal name is Bifinity UAB, a company previously identified by UK regulators as part of the Binance Group, and which SEC officials have previously testified is beneficially owned by Zhao.

Faced with regulatory woes, which also include enforcement from the Commodity Futures Trading Commission, Binance.US announced this week that it shed one-third of its workforce, including Chief Executive Officer Brian Shroder. Departing staff also reportedly include the company’s head of legal and chief risk officer.

UPDATE (Sept. 15, 2023, 15:10 UTC): Amends wording in first bullet, and second and fifth paragraph concerning Ceffu's status; adds reference to rebrand from Binance Custody and links to Bifinity; adds statement from Ceffu.