Binance Irked by SEC’s Move to Query CEO of US Affiliate

Binance has criticised the US Securities and Exchange Commission (SEC) for reportedly making “incredibly overbroad” and “unreasonable” demands for information over the past 45 days. The regulator’s discovery requests include demands that the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) of BAM Trading, the crypto exchange’s US affiliate, alongside at least four other senior executives, be made available for depositions or pre-trial testimony.

SEC Is Conducting ‘Fishing Expedition’: Binance

According to Binance, which filed for a protective order against the SEC yesterday (Monday), the consent order given to the SEC by the district court in Columbia in mid-June, only provides for “limited expedited discovery” related to the affiliate’s possession, custody and control of customer assets.

To fulfil this order, the crypto exchange said it gave the regulator the option of interviewing or deposing Sara Sisenwein, BAM’s Senior Director of Treasury Operations, and/or Erik Kellogg, BAM’s Chief Information Security Officer. It noted that both executives, who have “extensive firsthand knowledge” about US customers’ assets, submitted detailed declarations about the assets to the securities agency.

However, instead of taking advantage of the exchange’s proposal, the SEC is reportedly demanding that Binance provide at least six senior executives of BAM Trading for the pre-trial testimony. Responding, Binance claimed that the CEO and CFO of the crypto exchange’s local unit in the US do not have “unique firsthand knowledge” about customer assets.

Furthermore, the exchange disclosed that the SEC is demanding that BAM produce ‘all communications’ concerning dozens of subjects dating as far back as November 2022. The exchange said many of the topics “have nothing to do with customer assets.”

“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,” Binance stated in the court filing.

“At the bottom, the SEC is conducting a fishing expedition instead of seeking the narrow and ‘limited’ discovery authorized by the consent order to ensure customer assets are presently secure and available,” the digital asset exchange added, further noting that the regulator is yet to identity “the slightest evidence” that digital assets belonging to US customers “have been misused or mishandled in any way.”

Binance Faces Heat in the US

The request for a protective order is the latest in the SEC’s ongoing legal battle against the leading crypto exchange over its operations in the United States. In early June, the securities watchdog sued the exchange, alleging that the firm was operating an illegal trading platform, offering unregistered crypto asset securities and commingling customers’ funds.

The US Department of Justice is also considering whether to bring criminal charges against the exchange, even as two US lawmakers called on the government law enforcement agency to look into whether Binance made false representations to lawmakers earlier in March about its business dealings and ties to its local unit.

Separately, the Commodity Futures Trading Commission (CFTC) dragged Binance to court, raising similar allegations against the exchange and its CEO, Changpeng Zhao. However, the digital asset firm plans to seek the dismissal of the charges.

SEC Delays Decision on ARK Invest’s Spot BTC ETF

Meanwhile, recently, the SEC pushed the deadline forward to make a decision on ARK 21Shares, a spot Bitcoin (BTC) exchange-traded fund (ETF), by opening a 21-day public comment window on the proposed instrument. ARK 21Shares was jointly proposed by asset manager, ARK Invest, and crypto exchange-traded product (ETP) issuer, 21Shares.

In recent months, the regulator received several applications for spot BTC EFTs. A similar application submitted in mid-June by BlackRock, the world’s largest asset manager, boosted institutional interest in the instrument, Finance Magnates reported.

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