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Binance Under Fire: SEC Files Strong Reply In Compelling Case Amidst Employee Exodus

  • September 18, 2023

In the ongoing legal battle between the US Securities and Exchange Commission (SEC) and Binance, the SEC has filed a robust reply supporting its Motion to Compel. 

The agency emphasizes the increasing exodus of the exchange’s employees, who potentially hold crucial asset custody and control information.

SEC Raises Alarm Over Employee Exodus At Binance

According to the SEC filing, Binance.US’s alleged opposition to the motion exemplifies the “complexities” the SEC has faced in navigating this case. 

Despite initially agreeing to expedited discovery provisions outlined in the Consent Order, the exchange is now attempting to reevaluate its “scope and purpose,” according to the SEC. 

The SEC argues that Binance.US’s representations have been undermined by their documents and “inconsistent statements,” necessitating actual evidence to be obtained through expedited discovery.

The SEC accuses BAM (Binance.US parent company) of providing “inconsistent information,” slow-rolling document production, and obstructing access to categories of information that could shed light on the custody of customer assets. 

Per the filing, recent depositions reveal the existence of responsive documents and information that BAM either failed to search for or withheld without valid justification. 

Furthermore, the SEC highlights the urgency of expedited discovery in light of the accelerating exodus of Binance.US employees, including its CEO, who may possess vital information regarding asset custody and availability.

Allegations Of Withholding Relevant Documents

Per the filing, the SEC firmly asserts that Binance.US has not fulfilled its discovery obligations in response to the SEC’s requests for production and interrogatories. 

BAM’s claim of fulfilling its obligations by producing all documents within its possession, custody, and control is disputed by multiple witnesses who have identified relevant documents that were not produced. 

Additionally, despite testifying to their existence, Binance’s refusal to search for communications is deemed “unreasonable” by the SEC. The SEC seeks an order compelling BAM to produce documents and communications about any entity providing wallet custody software and related services.

The SEC argues that BAM’s limited discovery has failed to establish “credible explanations” for its crypto asset wallet custody arrangements, including its relationship with Binance. 

While BAM portrays Binance as a mere service provider, the SEC contends that Binance’s control over BAM for its own “unlawful purposes” is well-documented. 

The SEC emphasizes the need for expedited discovery to ensure the safety and availability of BAM customers’ assets throughout the litigation process, with BAM personnel in the United States retaining sole custody and control.

The exchange could face several consequences if the court grants the SEC’s motion to compel. Granting the motion would lead to increased scrutiny and an extensive 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 custody software and its relationships with entities like Binance Holdings Limited (BHL). Violations uncovered during the investigation could result in penalties, fines, and potential legal action. 

Binance
BNB’s surge on the daily chart follows the overall market trend. Source: BNBUSDT on TradingView.com

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