- Binance’s brief offensive in the SEC lawsuit has been stonewalled.
- The swift denial has raised questions about whether the attack was worth the effort.
- At the center of the matter is whether Binance mishandled customer deposits.
On June 21, Binance went on the offensive in its legal battle with the United States Securities and Exchange Commission. Citing allegedly misleading extrajudicial statements made about the case by the commission, the crypto exchange sought a court order to force SEC attorneys to comply with applicable rules of conduct.
But Judge Amy Berman Jackson denied Binance’s request, arguing that it was unclear how the SEC’s statements would impact the case outcome in a court order on Monday, June 26.
Judge Jackson’s order notably came without receiving any response from the SEC. The swift response has raised questions about the intent of the crypto exchange’s filing and whether the effort was worth it.
Was Binance’s Filing Worth It?
“No,” former SEC Internet Enforcement Chief John Reed Stark tweeted on Monday, June 26.
"I wonder how much Binance's motion cost in legal fees and whether it was worth filing. It seemed so frivolous on its face and more akin to marketing theater than a legal argument," he added.
Despite these statements, securities lawyer James “MetaLawMan” Murphy had previously argued that the Binance filing signed by former SEC enforcement chiefs like William McLucas and George Canellos would have sent ripples through the SEC camp. He also highlighted that the filing signaled that the exchange intended to put up a fight.
Binance and Binance.US attorneys did not immediately return a request for comment.
At the center of the dispute is whether the international crypto exchange and its founder Changpeng “CZ” Zhao, had access to and commingled U.S. customer deposits.
Claims of Mishandled Deposits
Early in the case, the SEC called into question the safety of Binance.US customer deposits, arguing that Binance was in the habit of mishandling billions in customer deposits and pushing for a temporary restraining order on the exchange’s assets on June 6.
Sponsored
On June 17, the move notably ended in a compromise, with the crypto exchange avoiding a total asset freeze. Per the so-called consent order agreement, Binance.US is to maintain sole custody of customer assets and provide reports of its expenses to the SEC.
Following the approval of the consent order, the SEC released a press statement asserting that it had secured “emergency relief” to protect U.S. customer deposits. SEC Director of the Division of Enforcement Gubir S. Grewal further emphasized the commission’s allegations that Binance and Zhao had access to and had been able to mix customer funds.
On the other hand, Binance attorneys contended that the SEC’s framing was misleading as it did not show that the consent order resulted from weeks of negotiations in their June 21 filing. At the same time, they bashed claims that Binance and Zhao had been able to commingle customer deposits as unfounded, highlighting that the SEC had failed to provide evidence in court.
Binance lawyers argued that the SEC’s statements only created confusion, hurt customers, and tainted the case.
On the Flipside
- Binance will seek to dismiss the SEC case, with motions to dismiss expected in September.
- The crypto exchange has hired several legal bigwigs to bolster its defense in the SEC case.
Why This Matters
Binance’s motion for a court order against SEC lawyers represents the first time the crypto exchange has taken the offensive in the case.
Read this to learn more about Binance’s complaint against the SEC:
Binance Blasts SEC for Misleading Claims About Consent Order Agreement
Binance wants to throw out the SEC case. Find out more:
Binance to Seek Dismissal of SEC Charges, Wants Fact-Finding Delayed
