SEC Calls for Court-Ordered Inspection of Binance.US Amid Concerns Over Asset Custody

Police & Regulations
Sep 19, 2023 at 11:08 am

The U.S. Securities and Exchange Commission (SEC) has taken a firm position, urging a court in Washington, D.C. to support its call for an investigation into Binance.US. This action stems from what the SEC perceives as inadequate cooperation from the cryptocurrency exchange in furnishing requested documentation for an ongoing legal probe.

Back in June, the SEC launched a legal action against Binance.US, along with its parent company Binance Holdings and its founder Changpeng “CZ” Zhao. The SEC asserted that they were operating an unlicensed securities exchange. Given the revelations thus far in the case, the SEC underscored the critical need for an investigation, particularly regarding Binance's adoption of the custody platform Ceffu, formerly recognized as Binance Custody.

The SEC harbors suspicions that Ceffu, post its rebranding earlier this year, may also be catering to Binance.US. This raises concerns of potential diversion of U.S. customer funds overseas, in violation of a prior agreement.

This agreement was established due to the SEC's skepticism regarding BAM Trading Services, the holding company of Binance.US, in demonstrating control over their customers' assets. The filing highlights that BAM's own documents and inconsistent narratives failed to corroborate its assertion of exclusive asset control.

The SEC is now seeking an order to compel BAM to reveal documents and communications pertaining to any entity providing wallet custody software and related services. This request is prompted by BAM's shifting explanations concerning Ceffu.

Furthermore, the SEC reprimanded the company for offering inconsistent information on pivotal matters, tardy submission of documents, and withholding entire categories of information that could potentially shed light on its dubious claims concerning the custody of customer assets.

While depicting Changpeng “CZ” Zhao as an individual who believes he is beyond the jurisdiction of any court, the SEC has called on the court to dismiss Binance's assertions of irrelevance, prejudice, and burden. Instead, the SEC is striving to compel the exchange to furnish the depositions, communications, and other information that has been requested.

In the meantime, Ceffu asserts that it operates as an independent third-party technology service provider and does not have a direct affiliation with Binance, even though its exact connections to the crypto exchange remain somewhat unclear. A hearing on this case is slated for later today at 3:00 p.m. EDT.

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