In a recent development, the U.S. Securities and Exchange Commission (SEC) Unsealed court documents Involves ongoing litigation against Binance.US and BAM Management US Holdings Inc.
The documents provide insight into defendants’ responses to and objections to plaintiffs’ first requests for documents and inspections.
Questions about Binance.US’s full collateralization
Court documents show that the SEC expressed reservations about Binance.US’s ability to ensure that customer assets are fully collateralized at certain critical times.
The findings are based on an audit conducted by Binance.US auditors, who reportedly encountered significant challenges verifying the platform’s complete collateral. The SEC’s concerns highlight potential risks to investors and the need for greater transparency and regulation of the cryptocurrency industry.
Collateralization is an important aspect of cryptocurrency trading platforms, ensuring that reserves fully back customer assets. Maintaining full collateralization is vital to the security and stability of the platform, as it guarantees that customers’ funds can be easily accessed and withdrawn when needed.
Any flaws in mortgage practices could expose users to potential losses and undermine market confidence.
Unsealed court documents also reveal that the SEC has requested extensive documentation and inspections of Binance.US’s internal processes and records.
However, Binance.US objected to multiple aspects of the SEC’s request. The platform argued that some of the demands were “overbroad, onerous or duplicative” compared with previous discovery requests and subpoenas in ongoing litigation.
In addition, legal counsel for BAM (the parent company of Binance.US) has stated that it is prepared to discuss with the plaintiff to resolve any disputes regarding the meaning, scope, relevance of the request, or BAM’s response and objections.
Raise objections
BAM raised objections to the preservation and production of electronically stored information (ESI) and documents that are not stored on live systems but are stored on backup tapes or other media that are no longer in its possession, custody or control.
They claim that such ESI is not reasonably accessible and would incur significant search, preservation, and acquisition costs. BAM claims that they are under no obligation to search such sources upon request.
In addition, Binance.US asserts protection of various privileges, including attorney-client privilege, work product doctrine, joint defense or common interest privilege, and applicable domestic or foreign laws.
They believe that these requests seek information or documents covered by those privileges or other protections and that their responses should not be construed as a waiver of those privileges.
The Company also contests requests seeking to provide trade secrets or information that is confidential, proprietary, commercially sensitive or competitive to it or any of its affiliates. They believe that disclosure of such information could adversely affect their business operations.
Notably, BAM’s responses to and objections to the specific requests were not detailed in the unsealed court filings. However, the document emphasizes that, unless otherwise stated, BAM intends to withhold response materials based on its objections to each request.
Despite their objections, BAM said it was willing to discuss the requests with the plaintiffs.
These disclosures raise important questions about the scope of document production, the burden placed on defendants, and the applicability of various privileges and protections. As the proceedings progress, further developments are expected to provide additional insights into the case.
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