Crypto Exchange Binance Files for a Protective Order Against SEC Lawsuit
On Monday, august 14, crypto exchange Binance filed for a protective order against the U.S. Securities and Exchange Commission (SEC) while claiming that the regulator’s request for the company’s communications are "overbroad" and "unduly burdensome”.
In a court filing dated August 14, Binance contended that, although it has diligently followed a court order from June, the SEC has issued excessively wide and unreasonable discovery demands. These requests aim to obtain "every single document in [Binance’s] possession related to customer assets.”
The crypto exchange noted: “BAM has worked in good faith, but the SEC has been steadfast in its belief that the Consent Order gives it carte blanche to investigate every aspect of BAM’s asset custody practices without any discernible limitation whatsoever”.
The June order by the SEC allowed for the discovery of Binance's custody, security and availability of customer assets. Nevertheless, Binance argues that these demands are unsuitable, as the SEC's lawsuit does not revolve around its asset custody practices. Binance emphasized that it had already provided information about customer assets, and the SEC has yet to present evidence of any misuse of customer assets.
Binance also expressed concern about the SEC's insistence on obtaining all communications dating back to November 2022 on numerous subjects, many of which are unrelated to customer assets.
Additionally, Binance raised objections to the SEC's demand for the deposition of six of its employees and officers, including CEO Changpeng "CZ" Zhao. The exchange added that its senior executives “do not have unique firsthand knowledge about the facts surrounding the security, custody, and transfer of customer assets.”
Binance also mentioned that it proposed the depositions of senior employees who directly oversee customer funds, but the SEC appeared to disregard this offer.Regarding the protective order, Binance aims to restrict the SEC's deposition to four exchange employees, excluding Zhao and its chief financial officer.
The order would also prevent the SEC from inquiring about matters beyond the specified scope and would put a halt to requests for communications on subjects unrelated to customer assets.
In June, the SEC filed a lawsuit against both Binance and Binance.US, asserting that they operated an unregistered securities exchange and sold unregistered securities. Zhao was also identified as a "controlling person" in the complaint.
Additionally, Binance is also dealing with a lawsuit from the Commodity Futures Trading Commission, and the exchange is working to have this case dismissed.