The U.S. Securities and Exchange Commission (SEC) has raised concerns that Binance.US, the American branch of the global cryptocurrency exchange, has not been forthcoming with crucial information required for an ongoing investigation. The SEC’s frustrations stem from what it describes as Binance.US’s reluctance or failure to provide detailed answers about the handling of customer assets, among other issues.
SEC Seeks Court Intervention
In a recent move, the SEC turned to the Washington, D.C. District Court, seeking assistance to compel Binance.US to speed up the discovery process. The regulatory body argues that it has hit a standstill with Binance.US on vital questions the latter remains hesitant or unable to address. The SEC’s legal team highlighted that Binance.US has dodged basic discovery duties, including the submission of document attachments and metadata, as well as delivering written responses.
A focal point of the SEC’s probe is to determine if Binance’s international employees had access to the American customers’ assets. The SEC claims that Binance.US has not satisfactorily demonstrated the absence of such access, including the control over private keys or other means to customer assets.
Binance.US Counters SEC Allegations
Contrary to the SEC’s allegations, Binance.US insists that it has fulfilled all regulatory requests for information, labeling the demands as excessively broad. The crypto exchange has urged the court to terminate the expedited discovery phase, defending its compliance and arguing that the SEC’s accusations about customer asset mishandling are baseless.
Binance.US has stressed its efforts to comply, pointing out the thousands of documents it has provided that cover “every conceivable aspect of its asset custody practices.” This includes sworn statements, monthly reports, and facilitating multiple inspections of devices used for customer asset custody.
Legal Troubles and Settlement
The backdrop to this dispute includes a lawsuit filed by the SEC in June last year against Binance, its U.S. entity, and the founder Changpeng “CZ” Zhao. The lawsuit accuses them of offering unregistered securities and mixing customer funds with a different company under Zhao’s control.
In November, Binance reached a significant settlement with the U.S. Department of Justice, agreeing to a $4.3 billion penalty for breaching money laundering and terrorism financing laws. As part of this agreement, Zhao pleaded guilty to money laundering charges and awaits sentencing on April 3, facing a possible 18-month prison term.
This ongoing clash between Binance.US and the SEC underscores the increasing scrutiny crypto exchanges face from regulatory bodies, highlighting the challenges in aligning the rapidly evolving crypto industry with established financial regulations.
