The United States Securities and Exchange Commission (SEC) has filed a motion at a District of Columbia court to allow the inspection of Binance.US. The ground of this motion was that the organization has failed to disclose documents needed in another suit between both parties.
Earlier this year, the SEC sued Binance Holdings, the company behind Binance US and Changpeng Zhao, accusing the firm of operating an unlicensed exchange. The regulator now says there is an urgent need to look into the firm. In the Monday court filing, the SEC expressed concern over the firm’s new platform, Ceffu.
The SEC vs. Binance.US
The regulator claims that the new platform is simply a rebrand of Binance Custody, is serving the parent company, and is currently being used to transfer money belonging to investors out of the country, contrary to an agreement both parties had reached that the same would not happen in a memorandum filed on September 14.
The conclusion was reached when the firm’s parent company failed to convince the regulator that it controlled investors’ funds, as BAM could not show that it had control over the assets.
Ceffu has responded to these claims by stating that they are independent third parties and are not under Binance. However, even though Ceffu has established itself as a technology service provider, It is still being determined what its relations with Binance are.
In its statement, the platform added that it is only committed to offering digital assets wallet solutions to entities outside the US. Ceffu also asserts that it is dedicated to compliance and transparency, both of which are necessary to ensure a thriving business environment in digital assets. The platform added that compliance is its cornerstone and is committed to upholding all sector standards.
What is the way forward for the SEC, Binance and Ceffu
In the Monday filing, the SEC sought an order of Mandamus (to compel) the BAM trading services to provide communications and documents regarding any subsidiary or entity providing wallet services for discovery due to the unclear explanations around Ceffu.
The SEC also raised an issue with the respondent’s non-compliance by stating that they were providing inconsistent information, stonewalled, and in small productions, which the regulator needs to shed light on the concerns on its control over consumers’ assets.
The firm had responded to the order by stating that the regulator’s claims were irrelevant, burden, and prejudicial, thus asking the court for a protective order. The firm had said that the SEC’s over-ambitious efforts in regulation are a fishing expedition, terming it as a house of mirrors.
The SEC requested the court reject these claims and compel the exchange for compliance to enable them to fulfill their functions.
The SEC also described the exchange CEO, Zhao, as an individual who views himself as above the law and not limited to the confines of any jurisdiction. The regulator is also seeking the testimony of Brian Shroder, Binance.US former CEO, and Jasmine Lee, the chief financial officer.
The firm responded by stating these moves would disrupt the company’s operations. The battle between Binance and the SEC has been riddled with back-and-forth motions. A hearing set for September 18 is likely to conclude these disputes.
The SEC’s claims against Binance of the latter’s use of Ceffu for its wallet services highlight the regulatory wrangles facing crypto entities. As regulators tighten the belt around crypto-related businesses by enhancing oversight and ensuring compliance,crypto-related entities must navigate the complex legal systems and requirements.
Ceffu’s response to the SEC shows the importance of setting clear boundaries between exchanges and custody platforms. Despite transparency not being a legal requirement, it is necessary to create trust and to redeem the industry’s reputation.
Source: https://www.cryptopolitan.com/sec-raises-concern-over-ceffu-and-binance/