Binance has filed a motion for a protective order against the US Securities and Exchange Commission. The cryptocurrency exchange said the SEC’s current requests are a “fishing expedition” and are “part of a broader pattern of the SEC abusing the discovery provision”.
BAM Trading, BinanceUS’ holding company, filed the protective order, which if passed will prevent the exchange from disclosing certain information. In this case, it relates to deposition notices and documents requested by the SEC.
“At bottom, the SEC is conducting a fishing expedition instead of seeking the narrow and ‘limited’ discovery authorized by the Consent Order to ensure customer assets are presently secure and available,” BAM wrote in the court document.
In June 2023, the SEC filed more than a dozen charges against Binance and its founder Changpeng Zhao. The regulator alleged the exchange violated securities laws, manipulated customers and misdirected consumer investments to Zhao’s separate fund.
Binance’s protective order
In the new filing, BAM argues that it has already provided sufficient documentation and evidence for the SEC to assess the security of customer assets. More than 200 documents were provided, consisting of over 5,000 total pages.
The court filing read: “BAM has diligently collected documents and information, made numerous productions, submitted a sworn accounting, offered four witnesses for depositions, and provided a substantial amount of additional information through letters, interrogatory responses, and declarations.”
Meanwhile, the regulator claims the current provided information is insufficient and more evidence is needed to prove consumers’ funds are secure.
As part of this, the SEC originally sent deposition notices for 14 BAM employees. The holding company noted that this goes against federal rules which only allows 10 witnesses.
“The SEC’s current position is that BAM must, at a minimum, make at least six witnesses available for depositions, including BAM’s CEO and CFO,” the court document added.
Requests have also been made for more information covering numerous different elements of the business that date back to November 2022.
“The SEC has declined BAM’s proposals or to meaningfully limit its requests. The SEC’s position is unreasonable and part of a broader pattern of the SEC abusing the discovery provision of the Consent Order.”
The SEC’s charges against Binance
Gurbir S. Grewal, director of the SEC’s Division of Enforcement said: “We allege that Zhao and the Binance entities not only knew the rules of the road, but they also consciously chose to evade them and put their customers and investors at risk – all in an effort to maximize their own profits.”
Binance declared that it kept customer funds in separate accounts from corporate funds. But it acknowledged that Zhao owned this BAM bank account, clarifying that the CEO did not have signatory authority over it.
BAM now argues that the SEC has all the information it needs to be assured that the customer assets are safe and secure. It especially emphasises that there is no need for a deposition with the CEO and CFO, claiming that they are not involved in the day-to-day management of the bank account.
“Accordingly, the SEC already has the relief it wants — confirmation that BAM’s customer assets are safe, secure, and sufficient to cover any customer claims or liabilities.”