- Binance.US has accused the SEC of stretching discovery obligations granted by the much-talked-about consent order agreement.
- The exchange has requested a protective order against the regulator to prevent the deposition of key executives.
- The firm contends that the SEC’s efforts are counterproductive.
While still in the pre-trial stages, the SEC case against Binance, Binance.US (Binance’s U.S. affiliate), and Binance CEO Changpeng “CZ” Zhao has not failed to provide talking points.
One of the biggest talking points of the case was the so-called consent order agreement reached in June 2023. While preventing a total freeze of Binance.US assets, the deal has also forced the exchange to open its books to the regulator and cooperate with a “limited expedited discovery.
In the latest dispute over the agreement, Binance.US has claimed that the SEC is attempting to turn the limited discovery into a “fishing expedition.
Binance.US Moves to Limit SEC Discovery
In a court filing dated Monday, August 14, Binance.US asserted that the SEC has requested “all communications” dating back to November 2022 from six employees, including its CEO Brian Shroder and CFO Jasmine Lee. At the same time, the firm claims that the SEC has asked for these persons to be made available for deposition.
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In response to the SEC’s request, Binance.US seeks a protective order to limit the regulator’s discovery efforts.
The exchange argues that while it has cooperated with the regulator in good faith, providing information and documents on various topics, including customer accounts and bank and payment processors, the recent SEC request exceeds the scope of the limited expedited discovery. According to the firm, discovery should be limited to documents and information related to customer assets.
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The crypto exchange contends it is willing to cooperate on communication discovery targeted at relevant issues. The firm also asserts its readiness to make available senior executives with intimate knowledge of customer asset security for deposition.
But Binance objects to the questioning of its CEO and CFO, alleging that it is unnecessary as they allegedly lack as much intimate knowledge on the relevant issue as the senior executives they are willing to offer. The crypto exchange posits that the effort to interrogate Shroder and Lee will lead to unnecessary expenses and disrupt business.
The SEC case has significantly impacted Binance.US’ business as the exchange announced the loss of its primary banking partner on June 9, just days after the lawsuit. Since the firm lost its banking partner, it has been forced to switch to a crypto-only model. At the same time, the exit of market makers has led to discrepancies in the pricing of crypto assets on the exchange on multiple occasions.
On the Flipside
- Binance has declared its intentions to seek the dismissal of the SEC and CFTC lawsuits.
- Binance.US’ CEO Brian Shroder has been inexplicably quiet despite the exchange’s recent regulatory troubles.
Why This Matters
The SEC’s so-called fishing expedition could be geared towards bringing more charges against the crypto exchange. At the same time, Binance’s effort to prevent the SEC from talking to its CEO and CFO raises questions about the firm’s confidence going into the case.
Read this to learn more about Binance’s plans to dismiss the SEC case:
Binance to Seek Dismissal of SEC Charges, Wants Fact-Finding Delayed
Coinbase is expanding to Canada despite stringent regulations. Find out more:
Coinbase Resists Canadian Crypto Exodus with “Official Launch”
