Binance Fights SEC 'Fishing Expedition' Over Customer Assets, Calls Data Demand 'Excessive'

Binance is seeking court protection against the U.S. Securities and Exchange Commission (SEC), alleging that the regulator is on a "fishing expedition" through its extensive discovery demands.

The firm contends in a court document, dated Aug. 14, that it complies in earnest with a court directive from June.

The SEC, however, has made "excessive" discovery demands, Binance argues. Regulators are essentially asking for "every single document in (Binance’s) possession related to customer assets," the filing states.

The directive from June permitted the SEC to probe into Binance's practices concerning the custody, security, and accessibility of client assets.

"BAM has worked in good faith, but the SEC has been steadfast in its belief that the Consent Order gives it carte blanche to investigate every aspect of BAM’s asset custody practices without any discernible limitation whatsoever," the filing states.

Binance asserts that SEC demands are misplaced, since the exchange's asset custody procedures weren't the main focus of the SEC's lawsuit.

Binance emphasized that it has provided details about client assets and challenged the SEC's lack of evidence suggesting any misuse of these assets.

Furthermore, Binance criticized the SEC's call for all communications since November 2022 on a wide range of subjects, many of which, according to Binance, are unrelated to customer assets.

Binance also expressed reservations about the SEC's demand to interview six of its staff members and executives, including CEO Changpeng Zhao.

The exchange countered that its top leaders "do not have unique firsthand knowledge about the facts surrounding the security, custody, and transfer of customer assets."

While Binance proposed interviews with senior staff who oversee customer funds directly, it claims the SEC overlooked this offer.

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The protective measures Binance is seeking would restrict the SEC to interviewing only four of the exchange's employees, excluding both Zhao and the CFO.

Additionally, it would prevent the SEC from questioning those interviewed on subjects beyond the scope of the order and would cease demands for communications unrelated to customer assets.

In June, the SEC initiated legal action against both Binance and Binance.US, accusing them of running an unauthorized securities exchange and selling unregistered securities.

The complaint also identified Zhao as a key influencer.

Separately, Binance is also contending with a lawsuit from the Commodity Futures Trading Commission, which the exchange is making efforts to have dismissed.

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