We might not be going to the moon after all. Following a troubling year for the crypto industry, regulators are seeking answers — taking aim at the sector’s most influential business: Binance. Earlier this year, the world’s largest crypto exchange was sued by the Securities and Exchange Commission (SEC), which alleges that the company ran its US-operated arm illegally.

Bye-bye Binance US: In response, Binance shuttered the majority of its US operations — laying off over a third of their stateside staff earlier this month, during which the US business’s CEO, legal chief and head of risk also departed (WSJ).

• In recent months, Binance has faced legal turbulence from US regulators, the US Department of Justice and an increasing number of skeptical global regulators who share their concerns.
• Binance’s global market share outside of the US has also fallen from 75% at the start of the year down to 54% in August — and in the US, its share of crypto trading has fallen from over 22% in April down to 0.9% in June.

What’s the (collateral) damage?

One of the most explosive claims against Binance and its US division is that the company misused customers’ funds. The auditor of Binance US indicated that it had been “very difficult to ensure the Company iss fully collateralized at specific points in time,” according to an unsealed court filing made by the SEC on Sept. 15.

• If Binance was flaunting disregard for users’ money in the US, they could also be doing it globally — underscoring a massive concern about the safety of centralized crypto exchanges.
• And if all this seems too familiar, that’s because it is. Misappropriation of users’ funds led to the implosion of crypto businesses such as FTX, Celsius, Genesis Global Trading and Voyager.

Their collapse also took down other businesses, spawning the current crypto winter. If Binance’s ills are any tell, it seems the crypto industry lacks trust because it can’t be trusted. A little regulation might shape up the industry’s act and put its biggest businesses on a good path, but for now, crypto-curious investors would be wise to tread carefully.