SEC Accuses Binance.US of Sabotaging Investigation Process

The case between Binance and the U.S. securities and exchange commission (SEC) has taken another turn, as the SEC is accusing Binance.US of not cooperating with the agency in an ongoing investigation.

BAM, the company behind Binance.US is said to be holding back information, as the exchange has only provided 220 documents. This is far less than what the commission has requested, it said through a spokesperson.

The SEC said in a Thursday court filing that following the case against the exchange in June, BAM agreed to provide all needed information concerning the custody, security and availability of U.S. customer assets, but hasn’t lived up to its promise.

“As of the date of this filing, BAM has only produced a little over 220 documents,” the SEC said. “Many are unintelligible screenshots of bank account information, documents without dates or signatures, and letters from counsel and tables that appear to be prepared for purposes of this litigation, without any supporting evidence or verification by an individual with knowledge confirming the accuracy of the information.”

Specifically, the SEC said BAM refused to provide information on Ceffu, a Binance subsidiary that is said to be in charge of customer assets. 

“BAM initially sought to defer Ceffu-related discovery as ‘non-priority,’ asserting it was ‘unrelated to the current custody and control of Customer Assets,'” the SEC said. “However, given that BAM’s policy identified Ceffu as providing ‘wallet custody software and support services,’ during a July 7 meet and confer, the SEC emphasized the need for this discovery, and BAM agreed to prioritize it,” the agency said.

SEC Seeks Court Order to Force Out Ceffu Information

The case has been in court since June, and hasn’t made much progress. While Binance has denied all the allegations against it, including trading of “unregistered securities” and mishandling of customer funds, the SEC hasn’t relented.

Consequently, the agency is requesting the court to order BAM to release the relevant information, especially regarding Ceffu, certain communications on customer assets, and its financial information.

“BAM has either declined or so far has yet to produce general ledgers as of end of second quarter 2023, bank account opening documents, and documents sufficient to show authorized signatories on the accounts, but they are crucial to testing BAM’s assertions that Customer Assets and BAM’s assets are safe, secure, appropriately segregated, and ready for immediate customer withdrawal,” the agency said. 

Binance Kicks Against SEC Request

While BAM agreed to an initial consent order agreement, it later alleged that the SEC was going overboard in its requests. The exchange therefore filed a counter motion last month asking for a protective order against the SEC, and said it had provided sufficient information to the agency. 

“The SEC has declined BAM’s proposals or to meaningfully limit its requests. The SEC’s position is unreasonable and part of a broader pattern of the SEC abusing the discovery provision of the Consent Order,” BAM wrote in that court filing.

So far, the SEC hasn’t made much progress in any case in the U.S. It lost against Ripple following a July ruling, which declared XRP as not a security. Although the commission has filed for an appeal, Ripple is still hopeful of victory.

More recently, it lost against Grayscale, a digital asset management platform seeking to convert to a Bitcoin spot ETF.

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