Binance Faces SEC Scrutiny and Legal Action

Simar Marwaha
Simar Marwaha Published on September 16, 2023 07:52 PM

Binance is under the SEC's watchful eye, and potential legal action looms on the horizon. The cryptocurrency exchange may find itself in court soon.

Binance Faces SEC Scrutiny and Legal Action
Source: Pexels

On Thursday, the U.S. Securities and Exchange Commission (SEC) took significant legal action by submitting a motion aimed at compelling the defendants to comply with disclosure requirements and contesting the motion for a protective order (PO) put forth by BAM Trading Services Inc. (BAM).

In their filing, the SEC pointed out multiple instances where the defendants had failed to sufficiently disclose information and grant access, with a particular focus on the absence of accounting documents and other crucial financial information.

The defendants at the centre of this legal battle comprise a list that includes Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and Chang Peng Zhao, who is a notable figure in the cryptocurrency world.

SEC Targets Binance in Regulatory Probe

The SEC's motion underscores their determination to ensure that all parties involved in the case fully adhere to disclosure regulations and provide the necessary documents and access for a thorough investigation. This legal development signifies a critical juncture in the ongoing proceedings, as the SEC intensifies its efforts to hold the defendants accountable for their alleged non-compliance with securities laws.

 The SEC's insistence on transparency and access to financial records emphasizes the significance of this case within the context of cryptocurrency regulation and its potential implications for the broader industry. How the courts will respond to these latest motions and whether they will lead to more stringent oversight and enforcement in the cryptocurrency sector remains to be seen.

The SEC stated,

“More than two months later and despite repeated good faith attempts by the SEC to reach further compromise with BAM, the SEC finds itself essentially where it was when it first sought relief from the Court. BAM continues to refuse, even in light of the Consent Order, to provide anything beyond extremely limited information to ensure that BAM’s Customer Assets are not at the mercy of Defendants Binance Holdings Limited (Binance) and Changpeng Zhao, two persons who view themselves outside the reach of the Court.”

In addition to requesting the court to enforce the defendants' compliance with discovery requirements, the SEC also sought the court's rejection of BAM's motion for a protective order (PO). Furthermore, the SEC requested permission to conduct depositions of BAM's CEO, CFO, and other individuals identified by the SEC as deposition witnesses.

On Friday, the court approved the SEC's motion to reveal documents that had been filed under seal the previous month. Although Binance's CEO CZ has refrained from addressing the ongoing SEC case, he did respond to the recent departures at the management level. In the case of Brian Shroder's departure, CZ shared his perspective with the following statement:

“There has been some speculation regarding recent management changes at Binance US. Brian Shroder is taking a deserved break after accomplishing what he set out to do when he joined two years ago. Under his leadership, Binance.US raised capital, improved product, and service offerings, solidified internal processes, and gained significant market share.”

CZ added,

“The crypto market is in a different place now than it was two years ago, with a rapidly evolving and increasingly hostile regulatory environment. Norman Reed – former SEC, New York Fed, Ripple, and DTCC executive – will lead Binance US in this market. Ignore FUD. Keep Building.”

Earlier in June, the SEC Filed 13 Charges Against Binance Entities and Founder Changpeng Zhao.


Binance's top legal and risk executives exit amid ongoing challenges

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