- The US SEC’s attempt to inspect Binance.US’s software was declined during a Monday hearing.
- The magistrate judge suggests the SEC sharpen its requests and broaden its witness engagement.
Binance.US and SEC Standoff: The Quest for Transparency
In the ever-evolving landscape of cryptocurrency exchanges and regulatory oversight, Binance.US finds itself embroiled in a tussle with the US Securities and Exchange Commission (SEC). On Monday, September 18, the SEC’s efforts to investigate the software infrastructure of Binance.US met resistance when they could not persuade a federal magistrate judge to grant their access request.
An Inspection Impasse
The root of this conflict lies in a lawsuit launched by the SEC against Binance.US and its global counterpart, Binance Holdings Ltd. In this suit, the SEC has alleged that Binance.US violated American securities regulations. As a part of their investigative proceedings, the SEC sought the judge’s approval to scrutinize the technological underpinnings of Binance.US and to compel the platform to release additional data.
Magistrate Judge Zia Faruqui, however, was hesitant to greenlight such an examination at this juncture. Faruqui’s guidance to the SEC was explicit: refine the scope of their demands and consider involving a more diverse set of witnesses in the inquiry.
The SEC’s disappointment stems not just from this procedural setback but also from what they perceive as a lack of cooperation from Binance.US. According to the SEC, the exchange has only furnished a modest number of documents (fewer than 250) and has presented a mere trio of witnesses for questioning. The SEC’s mention of a “mass exodus” from Binance in their filings further accentuates their concerns.
On the defense side, Binance.US remains staunchly protective of its operations. The firm’s legal counsel has branded the SEC’s demand for records as an overreaching “fishing expedition.” Furthermore, Binance.US has resisted making its senior leadership available for testimonies, contending that these individuals are not privy to direct details concerning client asset protection and custody.
Matthew Martens, a lawyer from WilmerHale championing Binance.US’s cause, emphasized the company’s compliance with all explicit SEC requisitions. He categorically stated that the exchange would refrain from heeding what they consider to be unwarranted governmental appeals for documentation.
This courtroom saga’s background also features an accord between the SEC and Binance.US post-lawsuit. This pact precluded a full lockdown of Binance.US’s resources. As per the terms, Binance.US can only channel its finances for fundamental business activities. The SEC, however, remains anxious about the perceived information blockade and the hurdles they face in interviewing pivotal participants.
With the judicial process in motion and stakes high on both sides, Magistrate Judge Faruqui’s words resonate:
“At some point we are going to have to bite the bullet and move on with the case.”