The Binance US branch has filed documents responding to the motion to compel by the US Securities and Exchange Commission (SEC). The crypto exchange described the SEC’s information requests as “unreasonable” and “unduly burdensome”.
Today, 12 September, attorneys representing BAM Trading Services, the operator of Binance.US, submitted court documents opposing the SEC’s request for more details from the exchange.
It comes after the SEC filed 13 charges against Binance entities and its founder Changpeng Zhao in June 2023. The charges included a range of allegations, such as operating unregistered exchanges, misrepresentations of trading controls, and the unregistered sale of securities.
SEC chair Gary Gensler said at the time: “We allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.”
Binance attacks SEC’s motion to compel
Binance’s lawyers raised several concerns regarding the SEC’s demands. They argue that the requests for production and interrogatories are “overly broad, unduly burdensome,” and even exceed the “scope of the consent order”.
Binance claimed that the SEC hasn’t found evidence of any misuse of BAM customer assets, after its multi-year investigation. It noted: “That has not changed despite four months of expedited discovery on the question.”
The defense also took issue with the SEC’s call for depositions of BAM’s CEO, Brian Shroder, and CFO, Jasmine Lee, labeling the requests as “unreasonable”.
BAM’s attorneys said that the CEO and CFO don’t have any exclusive knowledge relevant to the topics in the consent order’s expedited discovery provision. They mentioned that other witnesses, such as BAM’s chief information security officer Erik Kellogg, might be more insightful regarding BAM’s operations.
Binance’s first motion for protective order
In August, Binance filed for a protective order against the US Securities and Exchange Commission’s information requests. The crypto exchange claimed the SEC was conducting a “fishing expedition” and it was “part of a broader pattern of the SEC abusing the discovery provision”.
Binance was looking to prevent the exchange from disclosing certain information, specifically deposition notices and documents.
BAM said: “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.”
New protection motion agreed by SEC
More recently, both parties have agreed to a new protective order, which would give more privacy to Binance’s documents.
Filed on 11 September, this motion requires the SEC and Binance to submit confidential information under seal. This discovery material could include financial data, company ownership details, private keys, and non-public business plans.
Both parties have jointly moved for this protective order, meaning the information will stay confidential.
Binance distances itself from FTX
Amid the legal drama, recent comparisons have been drawn between Binance and the now-defunct FTX exchange. Richard Teng, the head of regional markets at Binance, addressed these comparisons in a conversation prior to the 2023 Token2049 conference in Singapore.
Teng was clear in his stance, stating that Binance operates differently from FTX. He said this was especially true when considering asset management and customer relations. Teng emphasised that the two exchanges have distinct operational structures, making direct comparisons misleading.
Changpeng Zhao, the CEO of Binance, also responded to these comparisons in a post on X (formerly Twitter). He highlighted that Binance’s assets are backed one to one, meaning the platform has more financial stability and transparency than FTX did.