SEC Accuses Binance US of ‘Shocking Lack of Transparency’ – What Happens Next?• September 16, 2023 3:31 pm • Comments
The U.S. Securities and Exchange Commission (SEC) has accused Binance US of a “lack of transparency” during its investigation into the cryptocurrency exchange.
In a recent court filing, the SEC alleges that Binance US’s holding company, BAM, has produced only 220 documents during the discovery process, some of which are described as “unintelligible screenshots and documents without dates or signatures.”
This development comes after the SEC filed a lawsuit against Binance in June, bringing forward 13 charges against the platform. These charges include allegations of breaking U.S. securities laws, failing to restrict U.S. investors from accessing Binance.com, and operating as an unregistered exchange, broker, and clearing agency.
SEC continues to push #Binance, saying they don't cooperate with the investigation.
Step 1: accuse someone of misconduct
Step 2: put as much legal pressure as you can
Step 3: don't find any evidence
Step 4: cry "no one wants to cooperate :("
Ultimate SEC mindset. pic.twitter.com/D4D930z69L
— Jesse's Palm (@Jessespalm) September 16, 2023
The SEC filed a lawsuit against Binance in June, with 13 charges issued against them. Now, the filing shows concern raised by the SEC regarding customer assets being controlled by a wallet custody service named Ceffu. That service is owned by Binance Holdings Ltd.
Interestingly, the ASEC argues that Ceffu maintains control of customer assets.
Yet, the previous agreement notes that those assets were meant to be in the sole custody of BAM and remain in custody within the US.
Additionally, the SEC states that BAM failed to provide enough evidence to illustrate that those assets are “at the mercy” of Binance holdings.
The SEC’s latest filing raises concerns about customer assets being controlled by Ceffu, a wallet custody software service owned by Binance Holdings Ltd., the international entity of the exchange.
According to a prior agreement, these assets were supposed to be solely in BAM’s custody and control within the United States, without involvement from other Binance entities.
However, the SEC argues that Ceffu appears to have control over customer assets through its role in establishing wallets and keys shards related to BAM Customer Crypto Assets, as well as its control of the Amazon Web Services environment hosting the wallet custody software and storing keys for both BAM and customer assets.
The SEC further alleges that BAM failed to provide sufficient evidence to demonstrate that these assets are not subject to the control of Binance Holdings Limited and its CEO, Changpeng Zhao.
The SEC filed charges against Binance crypto exchange for failure to cooperate with the investigation.
— Whale (@WhaleChart) September 15, 2023
The SEC also accused Binance US of having responded to its demands for relevant communications with “blanket objections,” and that it had refused to produce documents that it claimed did not exist, only for the SEC to acquire them from other sources.
Additionally, the filing said, BAM has consented to only four testimonies from witnesses they have independently deemed suitable.
These accusations by the SEC against Binance US come amid a wave of executive departures from the exchange.
Earlier this week, the Chief Risk Officer (CRO) and the Head of Legal resigned from Binance US, joining a long list of top Binance executives leaving the firm this year.
The SEC also accuses Binance US of responding to its demands for relevant communications with “blanket objections” and refusing to produce documents it claimed did not exist, only for the SEC to obtain them from other sources.
Additionally, BAM has reportedly consented to only four testimonies from witnesses they deemed suitable.
These allegations by the SEC coincide with a series of high-level executive departures from Binance, including the recent resignations of the Chief Risk Officer and Head of Legal at Binance US. These departures add to the growing list of top executives who have left the exchange this year.
As the legal battle between Binance and the SEC continues, these allegations of a “lack of transparency” raise further questions about the exchange’s regulatory compliance and the handling of customer assets.
— The Block (@TheBlock__) September 15, 2023
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