SEC vs. Binance Goes on with No Ruling as Judge Urges Cooperation

By Aaron Feuerstein September 20, 2023 In Binance, SEC
Source: Shutterstock

In the latest development between the United States Securities and Exchange Commission (SEC) and crypto exchange Binance, the federal agency has received a setback from Judge Zia Faruqui. The judge stated in the hearing that he wasn’t going to allow the SEC to inspect Binance.US’s software at this point and that the agency should be more specific in its requests. Back in June, the SEC sued Binance, BAM Trading, Binance.US, and founder Changpen ‘CZ’ Zhao over multiple alleged breaches of U.S. securities law.

In the suit, the SEC alleged that the defendants offered and sold unregistered securities in the form of Binance’s BNB token and the stablecoin BUSD, which it had issued together with blockchain infrastructure provider Paxos. Referring to recent Binance.US layoffs, the agency had urged for swift proceedings based on what it called an “accelerating mass exodus” as departing staff “may possess crucial information about custody, control, and availability of assets.”

Concerns Over Customer Funds

While Judge Faruqui denied the SEC’s request, he asked Binance to provide more detail about their management of customer funds. He said he wasn’t “super confident that BAM has total control of their assets.” BAM Trading is the parent company of Binance.US. Nevertheless, he urged both parties to work together on the outstanding issues, saying,” Let’s continue to try to work this out. I just want to keep things moving.”

According to the SEC filing, auditors were unable to fully attest that assets are secured. The SEC further alleged that crypto asset service provider Ceffu provided services for BAM Trading. Both Ceffu  and CZ deny this. As per agreements with the SEC, BAM Trading is supposed to keep funds of U.S. customers separate and only accessible to U.S. staff.


CZ stated in a post on X:

Is Binance Solvent? 

However, VC-Investor and well-known commentator Adam Cochran does not believe that Binance is solvent. He said Binance was creating obfuscation when claiming Binance.US never used Ceffu ‘because when an agreement between them was signed, Ceffu used a different entity name’. Cochrane pointed to court filings by Binance.US that mentioned the connection between Ceffu and Binance.US.

Regarding the auditor’s concerns, he wrote:

Meanwhile, there are concerns over trading volumes on Binance, which show a significant drop since the SEC lawsuit. Crypto data analytics platform Keiko stated: 

The next hearing is scheduled for October 12, with a joint status report due October 10.

Aaron Feuerstein

Aaron Feuerstein

Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.

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