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Global cryptocurrency exchange Binance has resorted to seeking protection in its ongoing dispute with the US Securities and Exchange Commission. The exchange filed a complaint on August 14, claiming that the SEC’s discovery demands, rooted in a June court order, exceeded their mandate:
“The SEC rejected BAM’s proposals or meaningfully limited its requests. The SEC’s position is unreasonable and part of a broader pattern of the SEC abusing the discovery provision of the Consent Order. The Consent Order allows for “limited expedited discovery” on a narrow set of subjects—namely, the custody, security, and availability of BAM’s customer assets.
The June directive, which allowed the SEC insight into Binance’s practices surrounding the custody and security of customer assets, according to Binance, was used by the regulator to request a wide range of documents. The exchange maintains that many of these documents have only a tangential relationship, if any, to the customer’s assets.
In its filing, Binance said that while they were complying and acting in good faith, the SEC’s interpretations of the June order seemed to go too far. The exchange highlighted its offer to provide deposits from senior employees responsible for customer funds, an offer that has yet to gain traction with the SEC:
“Below, the SEC is conducting a fishing expedition instead of seeking the narrow and “limited” discovery permitted by the Consent Order to ensure that the customer’s assets are safe and available. The SEC’s approach is highly vexatious and inappropriate.
The protective order contested by Binance seeks to reduce the SEC’s reach. It proposed limiting deposits to the exchange’s top four employees, excluding high-ranking officials such as Zhao or its CFO.
In addition, it aims to limit the scope of the questions within the framework of the June order, preventing extensive checks that are not related to the customer’s assets, because “the SEC has not established that its requests for all communications involving at least six witnesses are within the relevant scope of the Consent Order.”
This development follows the SEC’s lawsuit in June against Binance and its US branch, Binance.US, over allegations of operating an unregistered securities exchange and related trading. Notably, Binance is also facing challenges from the Commodity Futures Trading Commission, another regulatory arm of the United States, because “Binance is aware that they are violating CFTC rules, actively working to maintain the flow of money and avoid compliance.”
