Binance and Zhao Navigate Legal Waters: Responding to SEC's DOJ Integration

Binance Holdings and its former CEO, Changpeng Zhao, have responded to the United States Securities and Exchange Commission's (SEC) move to incorporate Binance’s admission of guilt to the Department of Justice (DOJ) in its ongoing legal proceedings.

Binance vs. SEC: Unraveling the Legal Battle since June 5, 2023

The legal dispute between Binance and the SEC commenced on June 5, 2023, when the agency accused the company of 13 securities law violations, alleging that Zhao and Binance mishandled customer assets on Binance.US and improperly redirected or mixed customer assets.

In a filing submitted to the U.S. District Court for the District of Columbia on December 12, Binance contested the SEC’s effort to include the $4.3 billion guilty plea and settlement agreement with the DOJ, deeming it procedurally incorrect and requesting its disallowance.

In November, the DOJ reached a separate settlement with Binance and its former CEO, concluding its investigation into the company. The settlement mandated Binance to pay $4.3 billion in penalties and permitted the company to continue its operations while adhering to U.S. regulations.

While not formally part of the settlement, the SEC argued that the federal court overseeing its case should consider the statements and acknowledgments made by Binance and Zhao in the settlement on November 21.

The SEC contended that these settlements indicated Binance's awareness of operating in the U.S., serving U.S. customers, and utilizing U.S. infrastructure for transactions. In response, Binance argued that the SEC failed to demonstrate how the resolutions with the DOJ were relevant to any of the SEC’s “faulty claims” against Binance Holdings and Zhao.

In court documents submitted on December 12, 2023, Binance argued that the SEC's notice does not substantiate its claims from the lawsuit of June 2023. The company asserted: “The SEC Notice is an impermissible supplemental brief that identifies no new 'authority' and instead attempts to introduce new factual information and arguments. This alone is a reason to disregard it.”

Furthermore, the company emphasized that presenting a judicial notice is not a substitute for amending a complaint. According to Binance's statement, the SEC's attempt to leverage resolutions with other agencies reflects a lack of information regarding any appropriate regulatory authority on the SEC's part.

💬 MCO NEWS WAVE 🌊 Binance Fights Back Against SEC Lawsuit, Citing Legal Requirements ⚖️ Cryptocurrency exchange Binance, Binance US, and its founder, Changpeng Zhao, have responded to the SEC's lawsuit by arguing that the SEC didn't meet the necessary legal requirements.… pic.twitter.com/Vv1ib6MgIO

Flight Risk Concerns: Judge's Decision Amidst Extradition Challenges

Earlier, Finance Magnates reported that a US federal judge ruled that Zhao must remain in the United States until his scheduled sentencing in February, overturning a previous bail agreement that would have allowed him to visit his UAE residency.

This decision came a day after Zhao pleaded guilty to one violation of the Bank Secrecy Act, with a $175 million bond agreement in place. Concerns about Zhao being a flight risk were raised due to the absence of an extradition treaty between the US and the UAE where most of his assets are located.

The judge acknowledged the defendant's significant wealth and family ties in the UAE, emphasizing the challenges in recovering bail proceeds if Zhao chose not to return for sentencing. The sentencing, potentially up to 18 months, awaits Zhao, who might serve around 10 months in prison, with anti-money laundering violations carrying a maximum penalty of 20 years without a plea agreement.