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Binance US Seeks Protective Order Against Renewed SEC Probe

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Binance US, the United States entity of digital asset exchange, Binance has filed a motion to limit the extent of discovery sought by the Securities and Exchange Commission (SEC) in its investigation against the company. 

The SEC filed a lawsuit against Binance US alleging improper registration, and commingling of user assets among others in June which later spilled into a consent order after the financial regulator sought to freeze assets belonging to the company trading under the name BAM Trading Services and BAM Management US Holdings.

The consent order agreed by both parties was described by most industry observers as burdensome on the part of the company as it still gave the SEC powers to a “limited expedited discovery” to the custody of funds and total availability of assets. 

In a late filing on Monday, the exchange claims that the regulator has exceeded the parameters of the consent agreement in its quest to carry out more investigations into the operation of the company.

Excerpts from the filing allege that the SEC has spent the last 45 serving over board requests on the company suggesting a lengthy regulatory battle with the exchange.

“The SEC has spent the past 45 days serving incredibly overbroad and unreasonable discovery requests that seek, on their face, every single document in Binance.US possession related to customer assets. The SEC has been steadfast in its belief that the consent order gives it carte blanche to investigate every aspect of [our] asset custody practices without any discernible limitation whatsoever."

No slight evidence is shown, Binance claims 

The hallmark of the exchange arguments so far is that the regulator has not provided the slightest evidence to show a breach in handling user assets after several years of investigations.

While the regulator demands more, Binance US claims that it has “worked in good faith” in providing hundreds of documents relating to matters requested by the SSC including depositions from staff who have direct knowledge on issues on user assets.

The company also claims that the Commission is requesting a detailed depository from senior executives like its CEO and CFO on expansive communications regarding user assets.

The exchange notes that both the CFO and CEO have little information regarding customer assets which is the central issue of the case.

Since the requests of the regulator would be too much of a burden, the exchange has suggested that staff who have primary knowledge of user assets make depositions with the SEC as it would be more beneficial to the investigations.

In conclusion, the exchange argues that the SEC’s approach is inappropriate as it goes wider than the subject matter of investigation.