In the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and Binance, the SEC gave a strong reply Support its motion to compel.
The agency emphasizes Increased outflows The number of exchange employees who may hold important asset custody and control information.
SEC sounds alarm over Binance employee turnover
According to SEC filings, Binance.US allegedly opposed the motion, which reflects the “complexity” the SEC faces in handling the case.
According to the SEC, despite initially agreeing to the expedited discovery provisions outlined in the consent order, the exchange is now seeking to re-evaluate its “scope and purpose.”
The SEC argued that Binance.US’s representations were compromised by its documents and “inconsistent statements,” necessitating expedited discovery to obtain actual evidence.
The SEC accused BAM, the parent company of Binance.US, of providing “inconsistent information,” slow document generation, and blocking access to the types of information that could reveal the custody of client assets.
According to the document, recent testimony revealed the existence of responsive documents and information that BAM failed to search for or withheld without justification.
Additionally, given the accelerated exodus of Binance.US employees, including its CEO, the SEC has emphasized the urgency of expediting discovery as they may hold important information regarding the custody and availability of assets.
Allegation of withholding relevant documents
According to the filing, the SEC firmly asserts that Binance.US failed to meet its disclosure obligations in response to the SEC’s production and inquiry requests.
BAM’s claim to have fulfilled its obligations by producing all documents in its possession, custody and control was challenged by multiple witnesses who pointed to relevant documents that had not been produced.
Furthermore, despite Binance proving their existence, the SEC found Binance’s refusal to search the communications to be “unreasonable.” The SEC is seeking an order forcing BAM to provide documents and communications regarding any entity that provides wallet hosting software and related services.
The SEC argued that BAM’s limited discovery failed to establish a “credible explanation” for its crypto asset wallet custody arrangements, including its relationship with Binance.
Although BAM describes Binance as a pure service provider, the SEC believes that Binance’s control of BAM for its own “illegal purposes” is well documented.
The SEC emphasizes the need to expedite discovery to ensure the security and availability of BAM client assets throughout the proceedings, with sole custody and control retained by BAM personnel in the United States.
If the court grants the SEC’s motion to compel, the exchange could face a variety of consequences. Approval of the motion would result in greater scrutiny and a broad investigation into Binance’s operations and potential violations of securities laws.
The company may be required to disclose sensitive information, including documents related to its wallet hosting software and its relationships with entities such as Binance Holdings Ltd. (BHL). Violations discovered during an investigation may result in penalties, fines, and potential legal action.
Featured image from iStock, chart from TradingView.com