In the latest developments to the Binance vs SEC trial, the judge has denied the federal regulator’s request to grant immediate access to Binance.US software.
According to the September 18 Bloomberg report, Judge Zia Faraqui asked the Securities and Exchange Commission (SEC) to be specific with its information request and denied its request to gain access to Binance.US software as the SEC claims that the embattled exchange is not cooperating with the investigation.
The SEC failed to win immediate access to inspect Binance US software in ongoing lawsuit against crypto exchange https://t.co/frYUbaqVwB
— Bloomberg Crypto (@crypto) September 18, 2023
The Caffu Custody Solution is The Reason For The Dispute on the Binance.US Case
As reported on Wealth Growth Insights, in an August 14 filing, the SEC accused Binance.US of not cooperating in the ongoing investigation and failing to produce essential witnesses for a deposition despite agreeing to a June 17 consent order “to provide expedited discovery and other relief relating to the custody, security, and availability of U.S. customer assets and those of BAM itself.”
The filing reads:
“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.”
Per the filing, Binance’s parent company, BAM, has only provided 220 documents during the discovery process, many of which consist of unintelligible screenshots and documents without dates or signatures. The SEC further noted that the exchange had agreed only to four depositions of witnesses, which it unilaterally deemed enough.
In a September 12 filing, Binance operator Bam Trading characterized these SEC’s discovery requests as “overly broad, unduly burdensome” and “beyond the scope of the consent order.”
The custody of Binance.US customer assets is one of the central concerns that the SEC has with the cryptocurrency exchange, and Binance.US’s use of Caffu, a wallet custody solution by the global entity of Binance, is the center of the dispute.
According to the August 14 filing, Caffu appears “to have control of Customer Assets through their role in the establishment of wallets and keys shards related to BAM Customer Crypto Assets,” and thus violates a prior agreement meant to prevent funds from being diverted abroad.
The US SEC asked the court to grant them access to Binance.US software, which the judge refused by saying he was not “inclined to allow the inspection at this time.” He asked both parties to keep things moving by urging the SEC to narrow down its request for information but allowing it to depose more witnesses.
The judge also asked Binance to provide more information about its relationship with Caffu. The court set an October 10 deadline for a joint status report and a follow-up hearing on October 12.
