A federal magistrate judge has declined the Securities and Exchange Commission's (SEC) request for immediate access to Binance.US's software, urging the regulator to provide more precise discovery requests.
The United States Securities and Exchange Commission encountered a setback as it was denied immediate access to Binance.US's software. The judge expressed that he was not inclined to permit the inspection at this juncture.
The hearing, which took place on September 18, revolved around the SEC's motion to compel Binance to furnish detailed information and make its executives more available for depositions, an issue that has been a point of contention between the two parties over the past week.
Judge Faruqui, during the hearing, stated that he was not inclined to allow the inspection at this time. Instead, he suggested that the SEC should formulate more specific discovery requests and engage with a broader range of witnesses, as reported by Bloomberg on September 18.
The SEC has consistently asserted that it has encountered difficulties in obtaining information from Binance.US since it filed a lawsuit against the American arm of the cryptocurrency exchange, along with its international affiliate Binance Holdings Ltd and CEO Changpeng "CZ" Zhao, on June 5. The lawsuit alleges their involvement in the sale of unregistered securities.
On September 15, the SEC accused Binance.US of noncooperation in the investigation, emphasizing that Binance.US's holding company, BAM Trading, had provided only 220 documents during the discovery process. A significant portion of these documents consisted of unintelligible screenshots and documents lacking dates or signatures, according to the SEC. The regulator also noted that BAM had been reluctant to produce essential witnesses for deposition, agreeing only to four depositions of witnesses it deemed appropriate.
Binance, on the other hand, had previously characterized the SEC's repeated discovery requests as "unduly burdensome," while the SEC contended that Binance was uncooperative, despite having consented to a discovery order in the SEC's case against it for unregistered securities activities and other allegations.
Judge Faruqui's decision to deny the SEC immediate access to Binance.US's software and other documentation represents a partial setback for the regulator in its ongoing case against the exchange. The custody of Binance.US customer assets is a central concern for the SEC, as the regulator believes a more thorough investigation of Binance.US is necessary to uncover potential links to the global arm of the exchange.
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