- Binance accuses the SEC of overstepping with its extensive discovery demands.
- The exchange offers senior employee depositions, but the SEC remains unsatisfied.
- Binance’s legal battles could reshape crypto-industry regulations.
Binance has submitted a request to the court for a protective order against the United States Securities and Exchange Commission (SEC). The exchange claims that the regulator has overstepped its authority with its discovery demands. Binance argues that the SEC’s calls for documents and depositions are not within the boundaries of the lawsuit it brought against the exchange in June.
In a recent court filing dated August 14, Binance argued that it cooperated in good faith with a June court order that allowed the discovery of the exchange’s custody, security, and availability of customer assets. However, the exchange claims that the SEC has served overly broad and unreasonable discovery requests that seek “every single document in Binance’s possession related to customer assets.”
Binance Challenges SEC’s Demands
Binance contends that the SEC’s requests are inappropriate, as its asset custody practices were not a concern in the SEC’s lawsuit. The exchange has already handed over information about customer assets, and the SEC has not provided evidence that customer assets have been misused.
Moreover, Binance has taken issue with the SEC’s demand for all communications dating back to November 2022 on “dozens of topics — many of which have nothing to do with customer assets.” The exchange also objects to the SEC’s request for depositions of six of its employees and officers, including CEO Changpeng “CZ” Zhao, arguing that its senior executives “do not have unique firsthand knowledge about the facts surrounding the security, custody, and transfer of customer assets.”
Binance has offered the depositions of senior employees with direct responsibility over customer funds, an offer that the SEC has seemingly declined.
Protective Order Sought
The protective order sought by Binance would limit the SEC to deposing only four exchange employees, excluding Zhao and the chief financial officer. It would also prevent the SEC from questioning those deposed about matters outside of the order and halt requests for communications about other topics besides customer assets.
In June, the SEC filed a lawsuit against Binance and Binance.US, accusing the exchange of operating an unregistered securities exchange and selling unregistered securities. The complaint also identified Zhao as a “controlling person.”
Binance is also contending with a lawsuit from the Commodity Futures Trading Commission, which the exchange is attempting to have dismissed.
Binance’s resistance to the SEC’s extensive discovery requests underscores the friction between cryptocurrency exchanges and regulatory bodies. The outcomes of these ongoing legal disputes could profoundly impact the cryptocurrency sector and the regulations governing it.
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