Binance vs. SEC: Legal Showdown Unveiled

Martin Walker
Sep 17, 2023 at 11:57 am

The Securities and Exchange Commission (SEC), the esteemed regulatory authority of the financial realm in the United States, has raised concerns about the adequacy of Binance's documentation, despite an initial consensus for expeditious disclosure.

BAM, a noteworthy entity responsible for overseeing Binance's affiliate operations within the US, diligently submitted approximately 220 documents as part of the information-sharing process. However, legal representatives representing the SEC have raised eyebrows in a recent filing, contending that a considerable portion of these records consists of enigmatic screenshots and conspicuously lack essential details such as dates and signatures.

The Legal Clash: Binance vs. SEC

Unfolding before our eyes is a gripping courtroom saga, a battleground where the SEC and Binance engage in a legal tussle. This drama commenced on the fateful day of June 5th, when the SEC, wielding its authority, initiated legal proceedings against Binance. A total of 13 charges were brought forth against the prominent platform, accusing it of transgressing the revered US securities laws. Furthermore, the SEC chastised Binance for its alleged failure to prevent eager investors within the country from accessing and engaging in transactions without adhering to the requisite registrations as an exchange, broker, or clearing agency.

Adding intrigue to this ongoing spectacle, the SEC has cast aspersions on Binance's cooperation level during the ongoing investigation, as divulged in these freshly unsealed documents.

To further complicate matters, the financial regulatory body has alleged that BAM, the overseer of Binance's US affiliate operations, displayed reluctance in providing vital witnesses for deposition. Instead of wholeheartedly cooperating, the entity chose to present only four depositions of witnesses it had, curiously, selected independently.

"The responses to our earnest requests for relevant communications have been accompanied by a blanket of objections, a veil of hesitancy, refusing to produce documents that are usually maintained in the regular course of their business. Astonishingly, they claim these documents do not exist, only for the SEC to later procure such documents from alternative sources."

Intriguingly, the SEC also raised red flags about Binance.US's utilization of Ceffu, a custody service graciously provided by Binance's global arm - Binance Holdings Ltd. This utilization seemed to be a breach of a previously established agreement, carefully designed to curb the indiscriminate transfer of assets beyond the nation's borders.

The SEC meticulously pointed out that BAM had proffered conflicting statements regarding the roles of Ceffu and Binance in the critical domains of wallet management and the secure custody of customer funds. In an initial communication, BAM confidently asserted that Ceffu dutifully served as its designated wallet custody software and service provider. However, as the narrative progressed, the entity's stance subtly shifted, affirming that Binance had taken up the mantle of being its esteemed wallet custody software provider.

Departures of Personnel at Binance.US

And amidst this legal whirlwind, we take a moment to delve into a parallel development. In the month of June, Binance, foreseeing a prolonged and potentially costly legal battle with the SEC, took a strategic step. The company earnestly beseeched Binance.US management to embark on a path of workforce downsizing, foreseeing the necessity to streamline operations in anticipation of legal rigors. This internal strategic maneuver was, unsurprisingly, met with internal challenges at Binance.US. Notably, several high-ranking executives, perceiving the tumultuous climate, made the choice to depart from the organization, seeking stability and solace elsewhere.

Caught in this vortex of departures, it's noteworthy to mention the departure of CEO Brian Shorder, a figurehead of the company. His recent departure stands as a testament to the turbulent seas Binance finds itself navigating, a microcosm of the stormy waters that have characterized the trajectory of the company in this eventful year.

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