The U.S. Securities and Exchange Commission (SEC) has
escalated its legal battle against Binance.US, urging a court in D.C. to allow
inspection into the exchange’s asset custody services. This move comes as the
SEC doubles down on its allegations that Binance.US has been evasive with
requested documents.
The latest development involves a protective order, aimed to
counter what the exchange terms as SEC’s “fishing expedition,” that
Binance.US sought in June. This matter was referred to Magistrate Judge Zia
Faruqui by Federal Judge Amy Berman Jackson.
The SEC’s legal
action against Binance.US dates back to June when the regulatory watchdog
filed a lawsuit targeting Binance.US, its global parent company Binance
Holdings, and its founder Changpeng “CZ” Zhao.
The main allegation was that they operated an unlicensed
securities exchange, raising concerns about investor protection and regulatory
compliance. In light of the developments so far in this case, the SEC has made
a compelling argument for the need to conduct a comprehensive inspection into
Binance.US.
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A major point of contention in this legal matter is
Binance’s custody platform, Ceffu, which was rebranded earlier this year from
Binance Custody. The SEC has raised suspicions that Ceffu may also be serving
Binance.US, potentially facilitating the transfer of U.S. customer funds
outside the country.
“The SEC seeks an order compelling BAM to produce
documents and communications concerning any entity providing it wallet custody
software and related services,” the filing said, reflecting the SEC’s
frustration with what it sees as evasive responses and changing narratives from
BAM.
The SEC has accused Binance.US of providing
“inconsistent representations about key facts, slow-rolled small
productions of documents and information, and stonewalled on entire categories
of information that would likely shed light on its shaky assertions concerning
the custody of customer assets.”
However, Binance.US has mounted a robust defense against the
SEC. On September 12, the exchange’s legal team submitted sealed documents in
response to the SEC’s motion to compel, labeling many of the regulator’s
demands as “unreasonable” and “excessively burdensome.
Binance.US Faces Drastic Trading Volume Drop
Meanwhile, a recent data from Amberdata on The Tie Terminal
revealed that the trading volume on Binance.US had
plummeted to a mere $5.09 million, a stark contrast to the approximately
$230 million recorded on September 17, 2022. The exchange’s lowest point was
recorded on September 9 when trading activity dipped to just $2.97 million.
Furthermore, Binance.US is grappling with
a wave of high-level
departures as its Head of Legal, Krishna Juvvadi, and Chief Risk Officer,
Sidney Majalya, recently stepped down from their roles. This recent leadership
shake-up followed closely on the heels of CEO Brian Shroder’s recent exit which
occurred this month in the midst of heightened regulatory scrutiny surrounding
the exchange.
In June, Finance
Magnates reported that negotiations had commenced between Binance.US and
the SEC, aimed at preventing a comprehensive freeze of the exchange’s assets.
These negotiations sought to strike a balance between safeguarding investor
funds and allowing the exchange to continue operating under regulatory
oversight.
The U.S. Securities and Exchange Commission (SEC) has
escalated its legal battle against Binance.US, urging a court in D.C. to allow
inspection into the exchange’s asset custody services. This move comes as the
SEC doubles down on its allegations that Binance.US has been evasive with
requested documents.
The latest development involves a protective order, aimed to
counter what the exchange terms as SEC’s “fishing expedition,” that
Binance.US sought in June. This matter was referred to Magistrate Judge Zia
Faruqui by Federal Judge Amy Berman Jackson.
The SEC’s legal
action against Binance.US dates back to June when the regulatory watchdog
filed a lawsuit targeting Binance.US, its global parent company Binance
Holdings, and its founder Changpeng “CZ” Zhao.
The main allegation was that they operated an unlicensed
securities exchange, raising concerns about investor protection and regulatory
compliance. In light of the developments so far in this case, the SEC has made
a compelling argument for the need to conduct a comprehensive inspection into
Binance.US.
Keep Reading
A major point of contention in this legal matter is
Binance’s custody platform, Ceffu, which was rebranded earlier this year from
Binance Custody. The SEC has raised suspicions that Ceffu may also be serving
Binance.US, potentially facilitating the transfer of U.S. customer funds
outside the country.
“The SEC seeks an order compelling BAM to produce
documents and communications concerning any entity providing it wallet custody
software and related services,” the filing said, reflecting the SEC’s
frustration with what it sees as evasive responses and changing narratives from
BAM.
The SEC has accused Binance.US of providing
“inconsistent representations about key facts, slow-rolled small
productions of documents and information, and stonewalled on entire categories
of information that would likely shed light on its shaky assertions concerning
the custody of customer assets.”
However, Binance.US has mounted a robust defense against the
SEC. On September 12, the exchange’s legal team submitted sealed documents in
response to the SEC’s motion to compel, labeling many of the regulator’s
demands as “unreasonable” and “excessively burdensome.
Binance.US Faces Drastic Trading Volume Drop
Meanwhile, a recent data from Amberdata on The Tie Terminal
revealed that the trading volume on Binance.US had
plummeted to a mere $5.09 million, a stark contrast to the approximately
$230 million recorded on September 17, 2022. The exchange’s lowest point was
recorded on September 9 when trading activity dipped to just $2.97 million.
Furthermore, Binance.US is grappling with
a wave of high-level
departures as its Head of Legal, Krishna Juvvadi, and Chief Risk Officer,
Sidney Majalya, recently stepped down from their roles. This recent leadership
shake-up followed closely on the heels of CEO Brian Shroder’s recent exit which
occurred this month in the midst of heightened regulatory scrutiny surrounding
the exchange.
In June, Finance
Magnates reported that negotiations had commenced between Binance.US and
the SEC, aimed at preventing a comprehensive freeze of the exchange’s assets.
These negotiations sought to strike a balance between safeguarding investor
funds and allowing the exchange to continue operating under regulatory
oversight.
