SEC seeks court intervention as Binance.US accused of withholding information

The U.S. Securities and Exchange Commission (SEC) has accused Binance.US, the United States arm of cryptocurrency exchange Binance, of failing to provide answers to important questions regarding customer assets and other crucial aspects of an ongoing investigation. In a joint status report filed on March 5, the SEC claimed that BAM Trading Services, operating as Binance.US, has been uncooperative and unwilling to provide information regarding the custody of customer assets. The SEC has requested the court’s intervention to expedite the discovery process. According to the SEC, Binance.US has not furnished sufficient information for the regulator’s investigation. The SEC’s lawyers stated that there is an impasse between the SEC and BAM regarding certain key questions, which BAM has chosen not to answer. The SEC also accused BAM of failing to comply with basic discovery obligations, such as producing attachments and metadata associated with relevant documents or providing written responses. At the center of the SEC’s investigation is the question of whether employees of Binance’s non-U.S. arm had access to Binance.US customer assets. The SEC alleges that Binance.US has not provided evidence that it did not have access to private keys or other means of accessing customer assets. In response to the SEC’s allegations, Binance.US argued in the report that it has fully complied with the SEC’s extensive requests for information and requested the court to terminate the expedited discovery process. Binance.US refuted the SEC’s claims concerning customer assets, stating that they were unfounded, and emphasized that it had gone above and beyond its obligations to cooperate with the securities watchdog. Binance.US stated that it had provided thousands of documents related to its asset custody practices, including sworn statements, monthly reports, and facilitated multiple inspections of shared custody devices involving customer assets. The SEC filed a lawsuit against Binance, Binance.US, and the exchange’s founder and former CEO Changpeng “CZ” Zhao in June 2020, alleging the sale of unregistered securities and the commingling of customer assets in a separate firm controlled by Zhao. Binance reached a $4.3 billion settlement with the U.S. Department of Justice on November 21, admitting to violating U.S. money laundering and terrorism financing laws. As part of the settlement, Zhao pleaded guilty to money laundering charges and awaits his criminal sentencing hearing on April 3, where he faces a possible prison sentence of up to 18 months.