Binance, the world’s largest cryptocurrency exchange by trading volume, has filed a motion for a protective order against the U.S. Securities and Exchange Commission (SEC), claiming that the regulator’s requests for information are “overbroad” and “unduly burdensome”.
Binance Challenges SEC’s Discovery Requests
According to a court filing in the U.S. District Court of Columbia on Monday, Binance’s U.S. operating company BAM Trading and its management company BAM Management are seeking to limit the scope and duration of the SEC’s discovery requests, which they say are “unreasonable and part of a broader pattern of the SEC abusing the discovery provision of the Consent Order”.
The Consent Order is a settlement agreement that Binance entered into with the SEC in June, after the regulator sued Binance and its CEO Changpeng Zhao for allegedly violating federal securities laws by operating an unregistered securities exchange, inflating its trading volumes, diverting customer funds, failing to restrict U.S. customers from its platform, and misleading investors about its market surveillance controls.
As part of the Consent Order, Binance agreed to cooperate with the SEC’s investigation and provide information and documents related to its operations, customers, assets, and compliance measures. However, Binance claims that the SEC has gone beyond the scope of the Consent Order and has demanded information that is irrelevant, privileged, or confidential.
Binance Says SEC is Conducting a ‘Fishing Expedition’
In its motion for a protective order, Binance argues that the SEC is conducting a “fishing expedition” and is looking for issues with the exchange that are not related to customer assets. Binance says that it has already provided sufficient information to the SEC to demonstrate that customer assets are available and secure, but the SEC has continued to request more information without any justification.
Binance also says that the SEC has asked for communications dating back to November 2022, which is before the Consent Order was signed and outside the relevant time period. Moreover, Binance says that the SEC has asked for communications that include topics that have nothing to do with customer assets, such as marketing strategies, business plans, regulatory compliance, and internal audits.
Binance further says that the SEC has requested depositions from six of its executives, including Zhao and its chief financial officer Wei Zhou, without explaining why their testimony is necessary or relevant. Binance says that these depositions would be “unduly burdensome” and “harassing” for its executives, who are based in different countries and time zones.
Binance asks the court to grant its motion for a protective order and limit the SEC’s discovery requests to four depositions from BAM employees who are directly involved in customer asset management, and to exclude Zhao and Zhou from being deposed. Binance also asks the court to limit the time period of the discovery requests to June 2023 onwards, and to exclude any information that is irrelevant, privileged, or confidential.
Binance Expresses Disappointment with SEC’s Litigation Strategy
In a blog post published on Tuesday, Binance expressed its disappointment with the SEC’s litigation strategy and said that it intends to “defend our platform vigorously”. Binance said that it has been working in good faith to address the SEC’s concerns and to comply with the Consent Order, but that the SEC has “abandoned that process and instead chose to act unilaterally and litigate”.
Binance said that it believes in “constructive dialogue” with regulators and hopes to resolve this matter amicably. Binance also said that it remains committed to providing a safe and secure platform for its customers and to complying with all applicable laws and regulations.