U.S. SEC Denied Authorization to Inspect Binance US Software
The U.S. Securities and Exchange Commission (SEC) was unable to obtain immediate court authorization to inspect the software of Binance US, the American arm of the world’s largest digital asset exchange, according to Bloomberg. The SEC has been struggling to gather information from Binance US since it filed a lawsuit against the exchange in June, along with its global affiliate and CEO Changpeng Zhao. The agency argued that Binance US had not fully complied with a consent order to provide documents related to customer funds. However, a federal judge denied the SEC’s request, stating that more specific requests should be filed.
Procedural Loss for the SEC
The decision by federal Magistrate Judge Zia Faruqui is a setback for the SEC, which alleged earlier this year that Binance and Binance US were not independent entities. The SEC aims to examine the technology used by Binance US to identify any connections with the global platform. It also wants to ensure that customer assets are under the control of the Miami-registered company during the litigation.
Binance US’s Resistance and Challenges
Binance US has resisted attempts to depose its executives, claiming they lack direct knowledge of customer fund security and custody. The exchange’s lawyers have criticized the SEC’s document search as overly broad. The legal battle with the SEC has significantly impacted Binance US, leading to a 98% decline in monthly trading volume since January 2022. The exchange faced difficulties with banking partners, resulting in the suspension of U.S. dollar deposits and a transition to crypto-only trading. Several key executives, including CEO Brian Shroder, have recently left their positions amid job cuts.
Hot Take: Challenges Persist for Binance US Amid Regulatory Scrutiny
The SEC’s failure to secure court authorization to inspect Binance US’ software is a temporary relief for the exchange, but challenges persist. The ongoing legal battle has damaged Binance US’s reputation and business operations, with a sharp decline in trading volume and the loss of key executives. While the denial of immediate access to its systems may buy some time for Binance US, it remains under scrutiny from regulators who are seeking to establish its relationship with the global platform. The outcome of this case will have significant implications for the future of Binance US and its ability to operate in the United States.