The U.S. Securities and Exchange Commission (SEC) has accused Binance US of non-cooperation in a probe into alleged federal securities law violations.
The SEC has raised concerns over using Ceffu, a custody service facilitated by the international arm of Binance. They believe this breaches a prior agreement designed to prevent the transfer of assets abroad.
The holding company of Binance US, BAM, has reportedly been less than cooperative during the discovery phase, the process where evidence is gathered.
According to the SEC, BAM has only submitted around 220 documents, many of which are either undated or unsigned and, in some cases, are incomprehensible screenshots. Moreover, the company has been reluctant to present vital witnesses for deposition, consenting to only four depositions of individuals they have selected as suitable.
“It has responded to requests for relevant communications with blanket objections and has refused to produce documents kept in the ordinary course of its business, claiming those documents do not exist, only for the SEC to later receive such documents from other sources.”
The US Securities and Exchange Commission
This scant disclosure has led to suspicions of potential violations of the consent order, an earlier legal agreement ensuring only US-based personnel can access funds.
The focal point of the SEC’s apprehension is the deployment of Ceffu, a wallet custody software supplied by Binance Holdings Ltd, an international entity. This raises the possibility of other factions within Changpeng “CZ” Zhao’s network exerting influence over the assets of US clients.
In a defense statement filed on September 12, Binance US dismissed the regulator’s apprehensions surrounding Ceffu as “overblown,” labeling the call for additional documents as a “pointless fishing expedition.”
The company argued that creating wallets as a provider of the Ceffu software does not grant the international branch access or custody over customer funds.
Earlier on June 5, the SEC initiated a lawsuit against Binance, levying 13 charges against the exchange, encompassing unregistered securities offerings and its staking initiative.
The SEC alleges that the domains Binance.com, Binance US, and BAM Trading should have registered as clearing agencies, broker-dealers, and exchanges, respectively.
This recent wave of allegations comes when Binance US navigates an internal crisis marked by a series of high-profile departures, including CEO Brian Shorder, the head of legal, and the chief risk officer, all exiting within a short span.