Binance US Seeks Protective Order Against ‘Fishing Expedition’ by SEC

Binance.US has filed a motion seeking a protective order to limit the scope of discovery sought by the Securities and Exchange Commission (SEC) in its case against the cryptocurrency exchange.

In June, the U.S. arm of Binance—operating under the names BAM Trading Services and BAM Management US Holdings—entered into a consent order with the SEC after the agency sought to freeze all of its assets over concerns about the security of customer digital assets held by the company.

The consent order—which some observers immediately called “burdensome”—allowed the SEC to conduct “limited expedited discovery” related to the custody and availability of customer assets,

According to the company’s late Monday filing, however, the discovery requests made by the SEC have gone far beyond the scope agreed upon in the consent order and amount to an inappropriate “fishing expedition.”

“The SEC has spent the past 45 days serving incredibly overbroad and unreasonable discovery requests that seek, on their face, every single document in [Binance.US] possession related to customer assets,” it asserts. “The SEC has been steadfast in its belief that the consent order gives it carte blanche to investigate every aspect of [our] asset custody practices without any discernible limitation whatsoever.”

Specifically, Binance.US claims that the SEC is demanding expansive communications and deposition testimony from company executives on “dozens of topics” unrelated to customer assets, including its CEO and CFO, who the filing says have little knowledge about the custody issues central to the case.

The request states that the company has “worked in good faith to respond to the SEC’s requests” by providing hundreds of documents, offering depositions from employees knowledgeable about asset security, and taking steps to ensure assets are in U.S. custody.

However, Binance argues that SEC has made “unreasonable demands” reflecting a “broader pattern of the SEC abusing the discovery provision of the consent order.”

The crux of the company’s argument in its request for a protective order is that—despite years of investigation and all the information provided—”the SEC still has not identified the slightest evidence that [our] customer assets have been misused or mishandled in any way.”

Binance further contends deposing top executives like the CEO and CFO would be unproductive, unduly burdensome, and disruptive to operations. They suggest the SEC first depose the employees responsible for asset custody who have “far deeper knowledge.”

Overall, the filing portrays the SEC’s approach as “overbroad” and inappropriate given the limited scope of discovery authorized on asset security issues, going after material that has no relation to the merits of the underlying case.

Editor’s note: This story was drafted with Decrypt AI from sources referenced in the text, and fact-checked by Ozawa.