By Pradeep Saran, September 19, 2023
The Securities and Exchange Commission (SEC) has alleged that Binance, a prominent cryptocurrency exchange, has been uncooperative in its legal case, despite initially agreeing to a consent order on discovery. As tensions rise between the SEC and Binance.US, the CEO of Binance, Changpeng Zhao, appeared nonchalant in the lead-up to a recent court hearing in the District Court for the District of Columbia on September 18. He shared a picture of company merchandise and a positive message about the company’s interns on social media.
Nonetheless, Zhao is likely to be closely monitoring the court proceedings, as the dispute between Binance.US and the SEC has intensified following a week of contentious legal filings. Magistrate Judge Zia Faruqui presided over a hearing on the SEC’s motion to compel, which Binance has argued is “unduly burdensome.” The SEC has accused Binance of uncooperativeness despite previously agreeing to a consent order related to the SEC’s allegations of unregistered securities operations and other violations.
Binance.US had previously agreed that only its U.S. staff would have access to customer funds. However, newly unsealed sections of the complaint filed by the SEC auditor in June have revealed challenges in assessing wallet balances historically, making it difficult to ensure the company’s full collateralization at specific points in time.
Furthermore, Binance.US has raised objections to the SEC’s initial requests for documents, stating that some requests are overly broad or impossible, especially when the agency asks the exchange to create new documents not in its possession or control. Binance.US has also claimed attorney-client privilege, trade secrets, personal information, and confidentiality for certain documents.
In a filing dated September 15, Binance.US has contested all 38 individual requirements pressed by the SEC. This legal battle underscores the ongoing tensions and complexities surrounding the regulatory oversight of cryptocurrency exchanges in the United States.