SEC and Binance Clash Over Evidence Production & Witness Depositions

U.S. Securities and Exchange Commission (SEC) and Binance continue to clash over evidence production and witness depositions in the regulator’s lawsuit against the leading cryptocurrency exchange. According to a joint status report submitted on Jan. 25, the regulator claims that BAM Trading Services Inc., the parent corporation of Binance.US, has not fully complied with its requests for information. 

The SEC argues that “there are important aspects of discovery from BAM that are outstanding.” The regulator has been searching for evidence that Binance.US had a “backdoor” to potentially manage users’ assets in a way similar to FTX.

On the other hand, BAM’s attorneys vehemently deny the allegations. They said the platform has adhered to all document production requirements as mandated in the consent order and the expedited recovery request. Further, they argue that the regulators’s methods, including issuing a Temporary Restraining Order (TRO) and pursuing expedited discovery, have unduly burdened BAM.

The company said:

“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.”

The consent order, a legal framework governing the SEC’s investigation, is now controversial. BAM said the SEC’s investigation should focus solely on confirming the safety of customer assets and proper accounting. The company accuses the regulator of exceeding this scope by broadly investigating BAM’s custody policies, procedures, and practices, both current and historical.

Binance Disputes Regulator’s Witness Examination Requests

The court documents also highlight ongoing disputes over the witnesses’ examination. The SEC seeks to depose “BAM’s former CEO and CFO,” Brian Shroder and Jasmine Lee, respectively. However, the company asserts that they had already provided sufficient witness testimony. The attorneys noted BAM provided additional witnesses with deeper insights on operations, like BAM’s chief information security officer, Erik Kellogg.

The SEC and BAM are also discussing a possible examination of Changpeng Zhao, who resigned as CEO in November. However, there are ongoing disagreements regarding the scope, timing, location, and number of depositions. Zhao faces up to 18 months in prison and is scheduled to be sentenced on Feb. 23.