Binance and the United States Securities and Exchange Commission continue to clash over evidence production and witness depositions in the regulator’s case against the crypto exchange, court documents indicate.
According to a joint status report filed on Jan. 25, the SEC contends that “there are important aspects of discovery from BAM that are outstanding.” BAM Trading Services is the parent company of Binance.US.
The SEC’s requests for evidence from Binance in the court case have been extensive and have led to some contention, particularly regarding custody and liquidity of assets. The regulator has been looking for evidence that Binance.US had a backdoor to potentially control customer assets in a way similar to FTX.
Attorneys for BAM assert that they have fully complied with the requirements for document production as stipulated in the consent order and expedited recovery request, urging the court to acknowledge that BAM has completed all its obligations.
“At that point, BAM believes it will have more than reasonably complied with its obligations under the Consent Order and requests that expedited discovery be deemed complete as to BAM, particularly given how much harm and burden the SEC’s TRO and approach to expedited discovery has caused BAM over the past seven months.”
The consent order is a legal agreement that specifies what the SEC is allowed to investigate. BAM argues that the SEC’s investigation should be limited to confirming that customer assets are safe and properly accounted for, accusing the regulator of exceeding this scope by broadly investigating BAM’s custody policies, procedures and practices, both current and historical.
Another point of issue in the case is the witnesses’ examination. Specifically, the document lists pending requests for “BAM’s former CEO and CFO,” presumably Brian Shroder and Jasmine Lee.
“BAM does not believe that the SEC is entitled to any additional depositions from current or former BAM personnel because, among other reasons, the SEC has already deposed a dozen witnesses during expedited discovery.”
Attorneys for BAM and the SEC are also discussing a possible examination of Binance co-founder Changpeng Zhao, with current disagreements over the scope, timing, location and number of depositions.
Zhao resigned from his position as CEO of Binance in November 2023 as part of a $4.3-billion settlement with U.S. regulators. His sentencing is scheduled for Feb. 23, 2024, while the next status report on the case is due by Feb. 15. Zhao is currently free on a $175-million bond in the United States, facing up to 18 months in prison.