Binance may have misled US lawmakers about its business dealings and ties to local authorities in a letter sent in March, Bloomberg reported on June 8.
In a letter to US Attorney General Merrick Garland, Senators Elizabeth Warren and Chris Van Hollen asked the Justice Department to investigate whether Binance made false statements to Congress earlier this year. In a lawsuit filed on June 5, the SEC accused Binance of commingling its global entities and US divisions. In March, three US senators headed by Warren wrote to Binance CEO Changpeng Zhao “CZ” and Binance US CEO Brian Shroder, questioning the exchange's operations and demanding a balance sheet. At the time, senators accused Binance and its US Affiliate of trying to evade local regulators, avoid sanctions and facilitate money laundering.
Nearly three weeks later, Binance chief strategy officer Patrick Hillman sent Congress the requested documents along with a 14-page letter that delved into the exchange's compliance history, acknowledging previous mistakes and claiming the company had Developed solid know-your-customer and anti-money laundering policies over the past few years. Syracuse University law professor Jack Graves told that the independence of Binance.US from its global unity is critical for two reasons regulatory jurisdiction and liability in case of failure.
"If you don't keep them independent, then US regulators will go after Binance International and say we have jurisdiction because you're doing it through a US entity. In fact, I think the SEC is paying attention to that," Gray Fuss said.
A second relevant aspect lies in the possibility of Binance.US going bankrupt. Graves noted that there is a fundamental principle that companies, not their owners, are responsible for their debts. “So, as long as Binance.US is fully independent and eventually goes bankruptcy, Binance International is under no obligation to repay Binance.US' debts." If the companies mix funds, the owners, Binance's global arm, will be liable in the event of bankruptcy. "That's why the corporate veil actually provides limited liability for the owners. A parent company like Binance International is like any other owner: it's protected. As long as those companies are truly independent, it's not liable, '” Graves continued, explaining that there may be exceptions.
On June 5, the companies responded separately to the SEC lawsuit. Binance's global arm claimed that it “cooperated actively with the SEC’s investigation and worked to answer their questions and address their concerns.” The exchange also stated, “While we take the SEC's allegations Seriously, they should not be the subject of SEC enforcement action, let alone in an emergency." Binance.US tweeted that the SEC's claims were its "latest example of enforcement oversight." The lawsuit is "baseless and we intend to vigorously defend ourselves ," it continued.
