In a Washington, D.C. courtroom, legal battles are unfolding between regulators and one of the world’s largest cryptocurrency exchanges, Binance. At the heart of the dispute lies the question: Is Ceffu, a crypto custody provider, truly separate from Binance and its U.S. operations, Binance.US?
Regulators are concerned about the potential use of Ceffu by Binance.US, the American arm of the global crypto exchange giant. Their unease stems from the idea of a foreign entity having control over the assets of U.S. customers. This concern became more pronounced when, in June, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance.US, Binance Holdings, and Binance founder Changpeng “CZ” Zhao. The SEC accused them of operating an unlicensed securities exchange and now seeks to safeguard American users’ assets during legal proceedings.
As the legal case unfolds, conflicting claims have emerged, adding complexity to an already intricate situation. Ceffu, originally launched as Binance Custody in December 2021, underwent a rebranding in February 2023. Despite assurances that this transformation would not affect products or user experiences, it is now at the center of a legal storm. Ceffu, the custody unit, has gone a step further by stating there is no relationship with Binance.
The SEC, in documents filed in August and unsealed in September, expressed concerns that Binance.US’s utilization of Ceffu might violate a previous legal agreement meant to ensure only local U.S. staff have access to funds. According to this agreement, Binance.US is prohibited from using any entity affiliated with Binance or Zhao for custody, though it can engage with third-party U.S.-based providers.
In a legal filing on September 12, Binance.US dismissed the SEC’s concerns as “much ado about nothing.” They argued that Ceffu does not gain control over customer funds and claimed that Ceffu is merely the market name for wallet custody software developed by Binance Holdings and licensed to the U.S. arm.
However, Ceffu contradicted these statements by announcing that it excluded the U.S. from its operations and strongly refuted the SEC’s claim that it provided third-party “wallet custody software and support services” to Binance.US. Binance.US did not immediately respond to this apparent contradiction.
A Ceffu spokesperson went even further, asserting that it is “factually incorrect” to suggest that Ceffu was provided by or offered by Binance or Binance Holdings. They emphasized that Ceffu is a “fully independent third-party technology service provider” and categorically stated that “Ceffu is not a Binance entity.”
The Murky Waters
Despite these claims, a deeper dive into legal documents reveals a different narrative. According to its own terms and conditions, Ceffu operates under the name Bifinity UAB. Interestingly, Bifinity’s registration in Lithuania, allowing it to provide crypto exchange and wallet services, is still listed on Binance’s website among various regulatory recognitions held by the exchange.
Furthermore, a November 2022 SEC filing disclosed that Zhao, the CEO of the Binance group, is the sole shareholder of Bifinity. The filing also revealed that two of Bifinity’s three board members had connections with Binance. A June affidavit submitted by the SEC states that the company is ultimately owned by Zhao.
The situation raises questions about whether Ceffu, after its February rebrand, genuinely severed ties with Binance. It remains uncertain whether Binance.US has had no dealings with the newly independent company or its products. A Ceffu spokesperson declined to discuss its current ownership or management.
The cryptocurrency custody controversy continues to cast a shadow over the relationship between Binance and Ceffu, leaving regulators, investors, and the crypto community to navigate these murky waters with uncertainty.