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Binance.US is making preparations for a legal battle and bolstering its legal team ahead of an upcoming hearing on June 13. In a filing, George Canellos, a partner at Milbank’s New York office, announced himself as counsel for both BAM Trading and Management.
Legal Battle Looms for Binance.US as Legal Team Strengthens Ahead of Hearing
Having served as a co-director of the enforcement division at the SEC, Canellos actively participated in investigations pertaining to the 2008 financial crisis, which led to imposing substantial penalties on financial institutions.
Canellos has established a history of advocating for executives and companies involved in SEC cases. Former Chief of the Commodity Futures Trading Commission, David Meister, commended Canellos for his esteemed standing within the regulatory community.
Last week, the SEC filed a lawsuit against Binance, Binance CEO Changpeng “CZ” Zhao, BAM Management, and BAM Trading, accusing them of violations of exchange and securities acts, as well as potential fraud.
The SEC is seeking a temporary restraining order and asset freeze against BAM Management and BAM Trading. In response, Binance.US announced a temporary pause on customer withdrawals and a shift towards being an all-crypto exchange by June 13.
The lawsuit filed by the SEC alleges that Binance, Changpeng Zhao, and Binance.US violated securities laws, resulting in profits at the expense of investors’ assets.
Binance US experienced a significant decline in its market depth following the SEC lawsuit. Investors have withdrawn funds in response to the regulatory issues faced by Binance and Binance.US.
Canellos, currently the global head of the litigation and arbitration group at Milbank, previously served at the SEC, overseeing prominent cases such as the Raj Rajaratnam insider trading case. He is highly regarded in legal circles, drawing comparisons to Liam Neeson and Perry Mason.
Other attorneys involved in the case include former federal prosecutor Adam Fee and bankruptcy expert Andrew M. Leblanc.
The SEC’s allegations against Binance are severe, accusing the company and its owner of manipulating customer funds. The SEC has requested the freezing of Binance US’s assets.
The charges against Binance encompass operating unregistered exchanges, broker-dealers, and clearing agencies, misrepresenting trading controls on the Binance.US platform, and the unregistered sale of securities. The SEC’s actions against Binance are part of its broader crackdown on the cryptocurrency industry, targeting major American crypto brands like Coinbase and Kraken.
Binance.US Liquidity Declines After SEC Lawsuit, Coinbase Gains Market Share
Following the recent lawsuit by the U.S. Securities and Exchange Commission (SEC) against Binance.US, the exchange is experiencing a mass exodus of market makers and traders.
According to a report by Kaiko, liquidity on Binance.US has plummeted by 76% in just one week, as measured by aggregated market depth for 17 tokens. Furthermore, Binance.US’s market share in the U.S. has fallen from 20% in April to 4.8% at present.
The Kaiko report reveals that on June 4, a day before the lawsuit was filed, market depth stood at $34 million. However, as of Monday, it had dwindled to $7 million. This decline in market depth has also affected Binance’s global operations, with a 7% drop in market depth since the beginning of June.
Surprisingly, Binance managed to sustain its market depth in the face of the lawsuit and even saw a surge shortly after the legal action. However, the Kaiko report indicates that market depth decreased over the weekend due to notable sell-offs in altcoin markets.
It’s interesting to observe that Coinbase, a U.S.-based exchange that faced a lawsuit from the SEC, has experienced a reduction in liquidity as well. During the same timeframe, Coinbase’s liquidity declined by 16%.
According to the Kaiko report, this significant drop in liquidity reflects the apprehension of market makers who aim to evade losses caused by volatility. Moreover, there is growing worry about the potential for assets to become trapped on an exchange, resembling the situation during the FTX collapse.
Interestingly, while Binance.US’s market share declined to 4.8% in June, Kaiko noted that Coinbase’s market share increased from 46% to 64% during the same week. The reasons behind this shift remain unclear.
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