Binance and CEO Chanpgeng Zhao asks court to dismiss SEC suit

September 22, 2023 Coin Telegraph

SEC sees temporary setback in request to access Binance.US software

September 19, 2023 Coin Telegraph

A federal magistrate judge has denied the SEC's request to gain immediate access to Binance.US's software, asking the regulator to provide more specific requests for discovery.

The United States Securities and Exchange Commission (SEC) has failed to win immediate access to Binance.US's software in a Sept. 18 hearing, with the judge saying he isn't “inclined to allow the inspection at this time.”

The hearing was held to discuss SEC’s motion to compel Binance to hand over detailed information and make its executives more available for depositions, which has been a point of contention between the two over the past week.

In a hearing, Judge Faruqui said that he wasn’t “inclined to allow the inspection at this time.” Alternatively, he proposed that the SEC should come up with more specific requests for discovery and speak with a broader range of witnesses, according to a Sept. 18 Bloomberg report.

The SEC has repeatedly claimed that it has been struggling to get information from Binance.US since it sued the American arm of the crypto exchange, along with its international affiliate Binance Holdings Ltd and CEO Changpeng "CZ" Zhao on June 5 for its alleged involvement in the sale of unregistered securities.

On Sept. 15, the SEC accused Binance.US of noncooperation in the investigation, with the regulator highlighting that Binance.US's holding company BAM Trading had produced only 220 documents during the discovery process.

A large portion of these documents “consist of unintelligible screenshots and documents without dates or signatures,” the SEC said. The regulator added that BAM has refused to produce essential witnesses for deposition, instead agreeing only to four depositions of witnesses it had deemed appropriate.

However, Binance has previously characterized the SEC's repeated requests for discovery as “unduly burdensome," while the SEC claimed that Binance is being uncooperative despite agreeing to a consent order on discovery in the SEC’s case against it for unregistered securities operations and other allegations.

Judge Faruqui's decision to deny the SEC immediate access to Binance.US's software and other documentation is a partial setback for the regulator in its ongoing case against the exchange.

The custody of Binance.US customer assets is one of the central concerns that the SEC has with the crypto exchange — with the regulator claiming that Binance.US must be investigated more thoroughly to tease out potential links to the global arm of the exchange.

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SEC and Binance.US to negotiate deal avoiding total asset freeze

June 14, 2023 Coin Telegraph

Binance court case

United States District Judge Amy Berman Jackson has ordered the two entities to work toward a compromise.

Binance.US and the United States Securities and Exchange Commission have agreed to work on an arrangement that will allow the exchange to avoid freezing all of its assets.

On June 14, Bloomberg reported that U.S. District Judge Amy Berman Jackson referred the two organizations to a magistrate judge to work toward a compromise arrangement to protect customer funds without having to shut down the exchange.

“Shutting it down completely would create significant consequences not only for the company but for the digital asset markets in general,” Jackson said at a June 13 hearing.

Judge Jackson noted she wouldn’t come to a final decision on the SEC’s motion for a temporary restraining order until the two parties had worked through the situation with the magistrate.

An update on the negotiations made with the magistrate has been scheduled for the end of business hours on June 15.

Additionally, she noted the SEC and Binance.US seemed “not that far apart” when it came to reaching an agreement on the matter.

Before Judge Jackson reached her decision at the hearing, former SEC enforcement attorney John Read Stark informed his 20,000 Twitter followers that there is “a lot of conflict between what each party” wanted to get out of the hearing.

SEC/Binance Newsflash: Dueling Consent Orders (Read Them Now)

The SEC and the Binance defendants have each submitted draft orders of what each party wants the Judge to order in the SEC/Binance Emergency Asset Freeze Enforcement Action.

There is obviously a lot of conflict… pic.twitter.com/UWjXSgL5lR
— John Reed Stark (@JohnReedStark) June 13, 2023

“That does not mean the judge cannot order a compromise and find common ground,” Stark explained.

The SEC filed an emergency motion for a temporary restraining order on Binance.US on June 6, after accusing Binance CEO Changpeng “CZ” Zhao of being able to access Binance.US customer funds.

The regulator alleged Zhao moved $12 billion of Binance’s funds through an entity he controlled called Merit Peak.

In a June 12 joint memorandum submitted ahead of the hearing on the restraining order, both Binance.US and Zhao denied the claims that funds were ever mishandled. They accused the SEC of being “unable to identify a single instance” in which Binance.US customer funds were ever misused.

“Indeed, there is no ‘emergency’ here at all, other than the one manufactured by the SEC for its own purposes.”

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‘All of the SEC’s claims fail’ — Binance.US rebuts motion to freeze funds

June 13, 2023 Coin Telegraph

Binance

Binance.US has lodged its defense ahead of the June 13 hearing on whether its funds will be frozen.

Binance.US has asked the court to deny the securities regulator’s proposed temporary restraining order against its assets, claiming that the move would “effectively end” its business.

In a June 12 filing, Binance.US slammed the Securities and Exchange Commission's emergency motion for a temporary restraining order on its business, calling it “draconian and unduly burdensome.”

The hearing on the temporary restraining order is scheduled for June 13 in the U.S. District Court for the District of Columbia.

SEC/Binance Newsflash: Binance Fights Back

Binance, CZ and the BAM Defendants just filed lengthy opposition pleadings to the SEC's emergency action. Find the links to two important pleadings below, which will give you a good idea of their defenses.

Should be an extraordinary… pic.twitter.com/qc5GRwHmjn
— John Reed Stark (@JohnReedStark) June 12, 2023

Binance.US argued that the restraining order would force the closure of BAM Trading Services Inc., the entity that provides crypto trading and exchange services for Binance.US, stating:

“The requested relief would primarily harm BAM’s customers, effectively put BAM out of business, and prevent BAM from defending itself in this litigation.”

Notably, Binance.US took aim at the regulator’s entire approach to pursuing legal action against it, asserting that “all of the SEC’s claims fail” because the regulator has not yet “identified a single security trading on BAM’s platform.” At the time of publication, the SEC has alleged that at least 68 cryptocurrencies are securities.

"The SEC suggests that it is a foregone conclusion that cryptocurrency is a security, but that is not the case. That numerous cryptocurrency exchanges, including BAM, have operated in the United States for years without interference by the SEC belies the claim that they are clearly covered by the securities laws," wrote the filing.

Furthermore, Binance.US said that it had made “significant efforts” to cooperate with an ongoing SEC investigation that began on Dec. 20, 2020. According to the filing, the results of this investigation have yielded more than 700,000 individual communications and “bespoke data” on its day-to-day operations.

Today we charged Binance Holdings Ltd. (Binance); U.S.-based affiliate, BAM Trading Services Inc., which, together with Binance, operates https://t.co/swcxioZKVP; and their founder, Changpeng Zhao, with a variety of securities law violations.https://t.co/H1wgGgR5ir pic.twitter.com/IWTb7Et86H
— U.S. Securities and Exchange Commission (@SECGov) June 5, 2023

The SEC first launched major legal action against Binance and its affiliates on June 5, accusing the crypto exchange and failing to register as a securities exchange and for allowing U.S. customers to trade cryptocurrencies it claims are securities.

Additionally, the regulator accused Binance CEO Changpeng Zhao (CZ) of being able to access Binance.US customer funds and alleged that he moved $12 billion in Binance’s funds through a privately-controlled entity called Merit Peak.

The next day on June 6, the SEC filed an emergency motion for a temporary restraining order against Binance, requesting that assets held on Binance.US be frozen until the crypto exchange could prove that the funds were not able to be moved by CZ or any other executive at Binance.

While both Binance and Binance.US have repeatedly denied the SEC’s claims on social media over the course of the last week, a joint memorandum submitted alongside the filing marked the first official comment made regarding the accusations.

It argued that the SEC is unable to “identify a single instance in which BAM customer assets were mishandled or misused.”

“Indeed, there is no ‘emergency’ here at all, other than the one manufactured by the SEC for its own purposes,” the memorandum added.

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Crypto sentiment index dips back to March ‘fear’ levels amid Binance lawsuit

June 6, 2023 Coin Telegraph

Binance SEC

Total liquidations have topped $280 million in 12 hours on June 5 as crypto market sentiment has turned more fearful.

The Crypto Fear and Greed Index — a tool that measures broader market sentiment towards Bitcoin and the broader crypto market — has dipped to a level of “fear” not witnessed since March 11 this year, when Circle’s USD coin (USDC) briefly lost its dollar-peg.

The stumble in market sentiment on June 5 comes in the wake of the United States Securities and Exchange Commission filing a lawsuit against Binance, its U.S. arm of operations and its CEO, Changpeng Zhao.

The SEC pressed a total of 13 charges against the exchange and its affiliates for failing to register as a securities exchange and operating illegally in the United States.

*The Bitcoin Fear and Greed Index. Source:* *Alternative.me*.

The index works by aggregating a mixture of indicators to gauge market sentiment. It combines metrics, including price volatility, momentum, trading volume, with data from social media and Google trends to form an overall picture of investor’s emotions toward Bitcoin and the wider crypto market.

Much of the negative sentiment owes to the immediate plunge in the value of cryptocurrencies following the SEC’s latest move against Binance. Blue-chip crypto assets such as Bitcoin and Ether (ETH) are down 4.1% and 3.1%, respectively, in the last 24 hours, according to data from Cointelegraph Price Index.

The larger altcoins also took a beating. At the time of publication, Cardano (ADA) was down 6.4% in the past24 hours, while Solana (SOL) had fallen 7.4%.

Traders with open positions on crypto derivatives markets also suffered consequences, with more than $280 million worth of liquidations occurring since the announcement of the lawsuit.

*Total liquidations in the past 12 hours. Source: Coinglass.*

Unsurprisingly, traders with open “long” positions — a leveraged bet on the price of crypto assets increasing — were the hardest hit, accounting for $261.75 million (92%) of the overall liquidations. Meanwhile, short traders experienced $20.7 million in liquidations. The top two digital assets were responsible for around 43% of these losses.

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SEC complaint hints at why Brian Brooks resigned as Binance.US CEO

June 6, 2023 Coin Telegraph

Binance CEO

New details revealed in the SEC complaint could explain why Brian Brooks abruptly stepped down as CEO of Binance.US in 2021, a crypto lawyer suggests.

The SEC’s latest complaint against Binance could point to why former Binance.US CEO Brian Brooks chose to step down in August 2021, only three months after his appointment.

According to a June 5 tweet from cryptocurrency lawyer James Murphy — known on Twitter as MetaLawMan — the SEC complaint cites an “unnamed source” who ran Binance.US for a brief period of time in 2021. The dates correlate with the time that Brooks was CEO of Binance.US.

1/ The SEC complaint against @Binance appears to solve the mystery of why Brian Brooks abruptly resigned as CEO of @BinanceUS in 2021.

CZ allegedly reneged on promises that Brooks would be given autonomy to run https://t.co/reBq6K7KAs independently from @Binance.
— MetaLawMan (@MetaLawMan) June 5, 2023

Brooks, a former top banking regulator, led operations at the crypto exchange after replacing former CEO Catherine Coley on May 1, 2021. According to comments cited in the complaint, Brooks quickly realized that he was “not actually the one running this company.” Upon recognizing this, he decided to leave and announced his resignation just three months later on Aug. 7.

Binance’s Chief Communications Officer Patrick Hillman, has however pushed back on Murphy’s speculation, adding that this “might be one person's narrative” and that it “might not hold up to the test of time.”

Cointelegraph reached out to Binance.US and Brian Brooks for comment but has yet to receive a response.

The information comes in the wake of the United States Securities and Exchange Commission pressing a total of 13 charges against Binance for allegedly failing to register as a securities exchange and operating illegally in the U.S.

Through thirteen charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law. https://t.co/E06hVOaYby
— Gary Gensler (@GaryGensler) June 5, 2023

The news wreaked havoc on the price of cryptocurrencies including Bitcoin (BTC) and Ether (ETH), which are down 5.6% and 4.3% respectively in the last 24 hours, according to data from Cointelegraph Price Index.

Shares of publicly-traded crypto companies in the U.S. also witnessed a sharp decline in price, with Coinbase (COIN) plunging 9% during market trading hours on June 5.

Coinbase next?

Mark Palmer, the senior equity research analyst at Berenberg Capital told Cointelegraph that several of the details revealed in the lawsuit “echo” those it previously filed against similarly U.S.-based crypto exchanges Bittrex and Kraken.

As such, Palmer believes that “these cases in aggregate represent a preview of the action that is likely to be filed against Coinbase.”

Palmer said that Coinbase investors should be focusing on whether the exchange has the ability to “successfully pivot” its business model and geographic focus if it were forced to “curtail or cease” a large portion of its operations in the U.S. as a result of SEC enforcement.

“We estimate that at least 37% of COIN's net revenue would be at risk if the SEC were to target the company's crypto token trading and staking operations.

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Binance CEO Warns of ‘Profound Impacts’ on Crypto Industry if BUSD Is Ruled as a Security

February 13, 2023 Bitcoin.com

Binance SEC

Coinbase next?

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