Judge Makes No Decision in SEC-Binance Document Case: "I Just Want to Keep Things Moving"

Uwagwu Bennett
Uwagwu Bennett Published on September 19, 2023 02:03 AM

The SEC's requests for discovery and Binance.US's resistance were not addressed by Judge Zia Faruqui's decisions.

Judge Makes No Decision in SEC-Binance Document Case: "I Just Want to Keep Things Moving"
Source: Pexels

On Monday, the US Securities and Exchange Commission was unable to persuade a federal magistrate judge to permit investigators access to Binance right away. A defeat for the Wall Street regulator in its lawsuit against the cryptocurrency trading platform stems from the US's software.

Since filing a lawsuit against Binance.US, its international partner Binance Holdings Ltd., and its Chief Executive Officer Changpeng Zhao in June, the SEC claims that it has had difficulty obtaining information from the American exchange. 

Binance’s U.S. Exchange Bucks SEC’s Document Requests

A court filing on Monday reveals that Binance's U.S. entity is fighting back against authorities' requests for papers relating to its business practices, escalating a legal battle over the company's internal documents.

The U.S. Securities and Exchange Commission's document requests, according to BAM Trading's attorneys, are "overbroad" and too much of an "inconvenience" for the exchange to comply with, they claim in the petition. The documents are needed by the SEC to support the lawsuit it filed in June against BAM for allegedly running an unregistered securities exchange.

“BAM objects to the [SEC’s] requests to the extent that they are vague, ambiguous, overbroad, lacking in particularity or oppressive,” BAM’s lawyers wrote in the filing.

While the pushback is not always effective, it can cause considerable delays in a case. It is usual for companies under investigation by government agencies to decline requests for information on the grounds that they are too broad or burdensome for their staff.


The SEC has asked BAM for a wide range of papers, including records of how the company handled customer assets and declarations attesting to its reserves and overall financial stability. However, the regulator claimed that those requests had been properly ignored.

One of the requests was associated with the exchange's alleged use of Ceffu, a custody service, to transfer funds of US clients abroad in defiance of the firm's agreement not to do so.

However, according to the complaint, BAM's attorneys said those demands were "unduly burdensome" and required BAM to incur "significant expense[s]". Additionally, according to the attorneys, some of the records are either not in the exchange's possession or "outside the scope" of what is relevant to the SEC's investigation.

Judge Makes No Decision in SEC-Binance Document Case

On Monday, the regulator asked a federal magistrate judge to order Binance.US to divulge more required material and to permit an assessment of its technological infrastructure.

Instead, Magistrate Judge Zia Faruqui asked the parties to collaborate on the multiple discovery requests, asking the SEC to focus its information request while still allowing it to depose some shard holders to determine the security of Binance.US's money. He suggested that the cryptocurrency exchange, a division of the larger Binance company, disclose additional details regarding its partnership with Ceffu, its service provider.

“I’m not going to order from the bench right now that they produce or not produce things. Let’s continue to try to work this out,” he said.

“I just want to keep things moving.”

Ceffu is much more closely related to Binance Holdings Limited, the company's global entity, than is permitted by a mutually agreed-upon order requiring Binance.US and its parent company BAM Trading to keep all U.S. customer funds in wallets accessible only by U.S. personnel. This is the main concern raised by the SEC in support of its position.

Binance.US's legal representative, Matthew Martens of Wilmer Hale, claimed that the regulator's requests for documentation were too general to be fulfilled. It's neither here nor there to figure out the precise workings of the software, he said.

The judge stated that further details concerning Binance's present custody arrangement are required: "I think we need more than we've got right now," he remarked, adding as a side note that he wasn't "super confident that BAM has total control of their assets."

Jennifer Farer, an attorney for the SEC, claimed that part of the problem is that "we don't know what we don't know," and that the regulator needs a lot of information on Binance.US's new wallet setup.

“That is foolishness. It’s not serious litigation,” Later on in the hearing, Martens stated.

The SEC filed a lawsuit against Binance and its founder Changpeng "CZ" Zhao in June, alleging that they operated an unregistered securities exchange. Since then, the regulator has worked to make sure that American customers' assets remain in the country.

The court appointed a follow-up hearing for October 12 and a deadline for a joint status report of October 10 respectively.




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