Editor’s note: This article was updated on June 14 to include a statement from the Binance.US team.
Binance is front and center today as the crypto market crashes. Its U.S. arm, Binance.US, is under new legal and regulatory scrutiny. In addition, the main Binance exchange also implemented a withdrawal freeze which lasted for several hours.
In other words, the world’s largest crypto exchange is having an action-packed start to the week. Following reporting from Reuters last week, crypto skeptics have been holding the company under a microscope. The article alleged that Binance plays a significant role in online crime through its exchange, processing transactions for the drug trade and even North Korean state-sponsored hacking organizations.
This has been fodder for Binance’s opponents. Sen. Elizabeth Warren, for example, has said that digital assets remain a safe haven for drug trafficking, theft and money laundering. Many advocates for digital assets have dismissed these claims as overblown. However, the Reuters article puts crypto back on the defensive.
— CZ 🔶 Binance (@cz_binance) June 8, 2022
Binance, Binance.US Face Several Headwinds
With these allegations top of mind, investors are processing three other key stories about Binance and Binance.US. The first stems from Zhao’s appearance at the Consensus 2022 conference. He downplayed the scale of an SEC probe into Binance, based on allegations that the release of BNB (BNB-USD) was an illegal securities offering. Zhao also said the company communicates regularly with the SEC, and that regulators frequently reach out to question Binance’s business practices. However, it’s worth noting that the case the SEC seems to be building closely mirrors that of its claims that Ripple conducted an illegal securities offering.
Speaking of legal battles, Binance.US is also coming under fire via a class-action lawsuit. Investors filed a claim against Binance.US in California, related to the company’s offering of Terra Classic (LUNC-USD) assets. The suit alleges that the company did not properly disclose the risks present in the protocol. Therefore, when Terra collapsed last month, these investors suffered heavy losses. Binance.US said in response that “Binance.US is registered by FinCEN and adheres to all applicable regulations. These assertions are without merit and we will defend ourselves vigorously.”
Capping off the news-heavy day for the exchange is a freeze it made on all Bitcoin (BTC-USD) withdrawals from the platform. As Bitcoin prices tumble 17% in the last 24 hours, the company says a transaction has become “stuck.” This issue left the exchange incapable of processing more transactions. The exchange froze withdrawals of Bitcoin for over three hours as developers remedied the issue.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.