Binance.US, the American arm of the world’s largest cryptocurrency exchange, secured a temporary respite from the U.S. Securities and Exchange Commission [SEC]. The development unfolded in a courtroom where Magistrate Judge Zia Faruqui played the role of mediator, urging both parties to collaborate while requesting the SEC refine its demands for an extensive inspection of the platform. Simultaneously, the judge pressed Binance.US to provide more comprehensive details about its custody solutions.
Judge Faruqui emphasized that his ruling was not intended to favor either party but to encourage cooperation and maintain the momentum of the proceedings. “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,” he remarked. “I just want to keep things moving.”
The backdrop of this legal skirmish is the SEC’s mounting pressure on Binance.US, with a particular focus on the exchange’s practices related to asset collateralization. The agency’s concerns were exacerbated by an auditor’s statement that expressed difficulty in ensuring the company’s full collateralization at specific points in time. Adding to the complexity of the situation were high-profile departures from the company and prior allegations of securities law violations, totaling 13 charges.
At the heart of the dispute lies the SEC’s insistence on obtaining extensive documentation pertaining to the firm’s internal control deficiencies regarding customer assets. Of paramount concern is Binance.US’s utilization of Ceffu, a custody service, which the SEC fears may violate a previous agreement designed to prevent assets from being hidden overseas.
The regulatory body accused Binance.US, operating under the name BAM Trading Services Inc., of making “half-hearted claims of irrelevance, prejudice, and burden.” While the American subsidiary initially agreed to cooperate, it later retracted, asserting that the SEC was making “unreasonable demands” in its quest for these documents.
Binance.US’ Next Hearing Set For Oct. 12
Representing Binance.US, attorney Matthew Martens argued vehemently against the SEC’s sweeping requests for documents, deeming them overly broad and impractical to fulfill. “Chasing down exactly how that software works is neither here nor there,” Martens contended. “That is foolishness. It’s not serious litigation,” he asserted during the latest hearing.
The judge, in an effort to maintain order and direction in the proceedings, set an October 10 deadline for a joint status report, with a subsequent hearing scheduled for October 12. The crypto community now watches with bated breath as these legal battles continue to unfold, as the outcome could significantly impact the future of cryptocurrency regulation in the United States.