April 24, 2024

The U.S. Securities and Exchange Commission (SEC) recently claimed that Binance.US has not fully complied with the order regarding its case. According to the regulator, the exchange has refused to provide adequate information about its customers’ assets and others.

As such, the SEC is requesting the court’s intervention in the discovery process of the case.

SEC Seeks Court Intervention On Binance.US’s Non-Compliance Approach. 

On Tuesday, March 5, the SEC filed a status report to a Washington, D.C. District Court. The regulator complained that Binance.US is withholding vital details regarding users’ funds and other core elements in the case. Further, the SEC mentioned that the exchange had not answered its requests for information about the custody of customers’ assets. 

The regulator’s attorneys wrote in the filing:

The SEC believes it is at an impasse with BAM as to certain key questions that BAM has been unable or unwilling to answer, and thus, the Court’s intervention is warranted.

Moreover, the SEC said that Binance.US didn’t want to comply with all basic discovery obligations. These include providing attachments and metadata associated with responsive documents or written responses. Additionally, the regulator said that Binance Holdings employees can access the Amazon Web Services servers hosting Binance.US’s software. 

A section of the filing reads:

Moreover, a discovery has revealed that BHL can at least effect transfers of BAM’s crypto assets from customer deposit wallets to hot wallets when transfers get ‘stuck’ while using the PNK system.

On its part, Binance.US argued that it complied with the necessary process in the case and investigation. Also, it mentioned providing several documents regarding ‘every conceivable aspect of its asset custody practices.’ Some of the documents include the exchange’s monthly reports and declarations under oath.

Moreover, it has facilitated some inspections of shared custody devices associated with customers’ assets. Regarding the SEC’s claim about BHL’s ability to transfer its users’ assets, the US-based exchange explained that its clearing officer sometimes contacts BHL personnel for technical assistance in events of transfer challenges. 

However, it reiterated that only Binance.US staff, not BHL employees, have control over customers’ assets.  

The SEC sued BAM Trading Services (operating as Binance.US), Binance Holdings (the global crypto exchange), and some of their executives. Notably, Changpeng Zhao, the crypto exchange founder, was the top executive in the lawsuit.

The regulator alleged that the Binance global and the US-based exchange violated U.S. securities laws. Also, it stated that Binance employees have been controlling the funds of Binance.US customers. However, Binance and Binance.US denied the SEC’s charges against them, filing for the dismissal of the case.

In June 2023, the court, under the directive of Judge Amy Berman Jackson, gave a consent order on the case. The order directed that Binance.US control its users’ assets and ensure expedited discovery. Binance and the U.S. Department of Justice arrived at a $4.3 billion settlement in November 2023.

As part of the agreement, Zhao resigned as CEO and pleaded guilty to money laundering charges.  


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