Recently, Binance challenged SEC, the leading crypto exchange, has file a motion for protection against the US SEC and an allegation that the regulator was on a “fishing expedition” using overbroad and unreasonable discovery requests.
This move showcases the ongoing clash between Binance and the SEC, shedding light on the complexities and challenges within the cryptocurrency landscape.
A Clash of Perspectives: Binance Challenges SEC
What the dispute is about is the SEC’s investigation of how Binance maintains its assets, which started after a complaint was filed on August 14th in the court. In this regard, Binance claims to have acted in good faith by adhering to a June court order that sought access to specific issues relating to custody, safety, as well as the availability of the client’s funds.
Nevertheless, Binance argues that its later discovery requests by SEC were unreasonably broad and without any apparent limit.
“Binance has worked in good faith, but the SEC has been steadfast in its belief that the Consent Order gives it carte blanche to investigate every aspect of BAM’s asset custody practices without any discernible limitation whatsoever,” the filing states.
Overreach and Reasoning
Binance takes issue with the SEC demands, asserting that the discovery requests go beyond the boundaries of its asset custody practices, which weren’t central to the SEC initial suit. The exchange further notes that it has already provided information regarding customer assets, and the SEC has yet to substantiate any claims of asset misuse.
Of particular contention is the SEC insistence on gaining access to communications dating back to November 2022 on various topics, some of which have no direct relevance to customer assets. This overreach is met with resistance from Binance, which maintains that such requests are not pertinent to the ongoing legal proceedings.
The Personnel Predicament
Another point of contention arises from the SEC’s request for depositions of six Binance employees, including CEO Changpeng Zhao “CZ”. Binance contends that these senior executives lack unique firsthand knowledge of the intricacies surrounding asset security, custody, and transfers.
In contrast, Binance claims that it offered to provide depositions from senior employees directly responsible for overseeing customer funds—an offer seemingly overlooked by the SEC.
In response to these grievances, Binance has submitted a request for a protective order to the court. This order aims to restrict the SEC’s ability to depose more than four Binance employees, excluding Zhao and the Chief Financial Officer. Additionally, the order would prevent the SEC from questioning the deposed individuals about matters beyond the scope of the initial court order, and it would curtail requests for communications related to topics not directly tied to customer assets.
A Broader Landscape
The ongoing legal battles surrounding Binance. On the other hand, the exchange faces a lawsuit by the CFTC in the US, which Binanne intends to dismiss. The legal battles are a reminder of the complexities of regulation that cryptocurrency exchanges face in a dynamic environment.
This makes it clear that the SEC versus Binance debate underscores where the line should be drawn between regulation control and precision required in legal procedures. The future of cryptocurrency will depend on how conflicts between regulators and businesses are addressed in line with technological advancements.