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Legal battle escalates between Binance and SEC over discovery disputes

TL;DR

  • SEC and Binance clash over evidence and witnesses.
  • BAM Trading Services claims compliance, but the SEC disagrees.
  • The case involves Binance’s control and Zhao’s resignation.

In an ongoing legal dispute between cryptocurrency exchange Binance and the United States Securities and Exchange Commission (SEC), tensions have escalated as the parties wrangle over evidence production and witness depositions. The latest joint status report filed on January 25, 2024, reveals the contentious nature of this regulatory case.

SEC outstanding discovery issues

The SEC has asserted that there are critical aspects of discovery related to BAM Trading Services, the parent company of Binance.US, that remain unresolved. Central to the dispute are the SEC’s extensive requests for evidence, particularly about the custody and liquidity of assets held by Binance. The US. The SEC is keen to ascertain whether Binance.US had any potential backdoor access to control customer assets, a concern akin to what was seen with FTX.

In response to the SEC’s demands, BAM Trading Services maintains that they diligently adhere to the document production requirements specified in the consent order and expedited recovery requests. 

They urge the court to recognize their compliance and consider expedited discovery complete for BAM. Furthermore, BAM argues that the SEC’s Temporary Restraining Order (TRO) and its approach to expedited discovery have inflicted undue harm and burden over the past seven months.

Scope of the SEC’s investigation

Another point of contention is the consent order, which outlines the scope of the SEC’s investigation. BAM contends that the SEC’s inquiry should be limited to confirming customer asset safety and proper accounting. 

They accuse the SEC of overstepping its bounds by broadly investigating BAM’s custody policies, procedures, and practices, both past and present.

Witness examinations

The document also highlights ongoing disagreements regarding witness examinations. Specific requests have been made for depositions of “BAM’s former CEO and CFO,” presumably referring to Brian Shroder and Jasmine Lee. 

BAM opposes additional depositions of current or former BAM personnel, citing the numerous depositions that have already occurred during expedited discovery.

Additionally, discussions are underway concerning the examination of Binance co-founder Changpeng Zhao. However, disputes persist regarding the scope, timing, location, and number of depositions related to Zhao. Zhao’s resignation as CEO of Binance in November 2023, as part of a $4.3-billion settlement with U.S. regulators, adds complexity to the case. 

His sentencing is scheduled for February 23, 2024, while the next status report on the case is due by February 15.

Currently, Zhao is free on a $ 175 million bond in the United States and faces a potential prison sentence of up to 18 months. The legal clash between Binance and the SEC appears far from reaching a resolution.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Ibrahim Abdulaziz

A fervent advocate, Ibrahim shares his wealth of knowledge on crypto and blockchain technology in an engaging and informative style. He frequents places where influencers gather for his next scoop. His vision is that the decentralized nature, security features, and potential for financial inclusion will drive widespread massive crypto adoption.

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