Judge Denies SEC Access to Binance US Software
Federal judge blocks SEC's bid to inspect Binance.US's software amidst ongoing legal proceedings over alleged sale of unregistered securities.
Recently, a federal magistrate judge blocked the US Securities and Exchange Commission's (SEC) bid to inspect Binance.US's software.
The SEC's interest in Binance.US isn't new. The regulatory body initiated legal proceedings against Binance.US, its global counterpart Binance Holdings Ltd, and CEO Changpeng "CZ" Zhao in June. The primary contention? Alleged involvement in the sale of unregistered securities.
The SEC has voiced its challenges in obtaining information from Binance. US. Despite an agreement on a discovery consent order, the SEC has labeled Binance as uncooperative. The regulator highlighted that Binance.US's holding company, BAM Trading, produced a mere 220 documents during the discovery phase, many of which needed more clarity.
During a Monday court session, the regulator requested a federal judge to permit a review of Binance US's technical systems and compel the firm to provide additional data related to the continuing lawsuit against the platform. Their primary goal was to inspect Binance.US's software, especially its relationship with the custody platform Ceffu, formerly known as Binance Custody.
SEC seeks court order for inspection of Binance US.
Now expressly calling out that Ceffu is indeed a Binance related entity and that Binance US has been misleading the court. pic.twitter.com/2XZ2kChib3 — Adam Cochran (adamscochran.eth) (@adamscochran) September 18, 2023
Federal Magistrate Judge Zia Faruqui, in a decisive move, denied the SEC's request. He suggested that the SEC refine its information requests and consider interviewing a broader set of witnesses. While acknowledging the need for more clarity on Binance's relationship with Ceffu, Judge Faruqui emphasized collaboration and understanding between the two parties.
Binance.US's legal team has consistently labeled the SEC's demands as overly broad, even going so far as to term them a "fishing expedition." They argue that the regulator's requests are outside the agreed-upon discovery process.
The SEC's interest in Ceffu, a custody platform associated with Binance, stems from suspicions that it might have facilitated the movement of US customer funds overseas. While the exact nature of this relationship remains under scrutiny, it's clear that Ceffu is central to the ongoing legal discourse.
The desire to examine Binance's software stemmed from the need to discern Ceffu's involvement in the purported unauthorized transfer. Although Judge Faruqui declined the appeal, the SEC is expected to persist in its efforts.