A U.S. Judge's Decision on SEC's Request to Inspect Binance.US

Bombolo | News and Media

In the second quarter of 2023, the SEC made serious allegations against Binance and its founder, Changpeng Zhao, commonly known as CZ. The commission claimed that Binance was operating as an unlicensed securities exchange. Since these allegations emerged, the SEC has been determined to ensure that the assets of Binance's U.S. customers remain within the United States.

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The Judge's Call for Collaboration

Rather than making a hasty ruling in favor of either party, the judge presiding over the case has opted for a more cooperative approach. Magistrate Judge Zia Faruqui stated during the hearing,

"I'm not going to order from the bench right now that they produce or not produce things. Let's continue to try to work this out. I just want to keep things moving."

This decision reflects the judge's desire to encourage both the SEC and Binance to collaborate and address the issues at hand amicably.

SEC's Concerns and Binance's Response

The SEC's primary concern revolves around the safety of customer funds held by Binance.US. The commission has been requesting additional information about Binance's relationship with its service provider, Ceffu. In a recent article, Binance criticized the SEC for its inability to provide evidence of any wrongdoing related to customer funds. In fact, Binance described the SEC's motion for further discovery as "unduly burdensome" and "freewheeling." Binance's legal team argued that the depositions requested by the SEC placed an excessive burden on them and that the discovery sought was disproportionate to the needs outlined in the Consent order.

Judge's Request for More Information

During the latest court hearing, the judge urged Binance to provide more details about its current custody solution. Judge Faruqui expressed reservations, stating that he was not "super confident that BAM [Binance.US] has total control of their assets." He emphasized the need for additional information, saying, "I think we need more than we've got right now."

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FAQs

1. What were the SEC's allegations against Binance?

   The SEC alleged that Binance was operating as an unlicensed securities exchange in Q2 2023.

2. Why did the judge refrain from passing an immediate order?

   The judge chose to encourage collaboration between the SEC and Binance to address the issues.

3. What is the SEC's primary concern in this case?

   The SEC is primarily concerned about the safety of customer funds held by Binance.US.

4. How did Binance respond to the SEC's requests for further discovery?

   Binance criticized the SEC's requests as "unduly burdensome" and argued that they were disproportionate to the needs outlined in the Consent order.

5. What did the judge request Binance to provide more information about?

   The judge asked Binance to provide more details about its current custody solution and expressed concerns about the control of customer assets.